Conservation all-stars
Be sure to visit either of the Five Star Day Cafes in town. Why? Because, as The Wife and I learned last night, they have decided to offer bottled water at cost (18 cents) due to the drought. The gentleman behind the counter told me they wanted to conserve water, but the staff didn't think it was fair that folks would have to pay a dollar or so for a bottle.
Very cool idea, and kudos to them.
(This might become a recurring item here. If you see a business that conserves in a smart way, shoot me an email and let me know.)
Very cool idea, and kudos to them.
(This might become a recurring item here. If you see a business that conserves in a smart way, shoot me an email and let me know.)
posted by Jmac at 9:57 AM
28 Comments:
That is a great idea by 5 Star Day. And, may I point out what the good effect will be? Assuming people take them up on this offer and buy a whole bunch of these bottles of water, then Five Star Day will end up putting in more orders for bottled water (at their discounted bulk-ordering raters, which I assume is how it only costs them 18 cents a bottle), and the final result will be that there is MORE cheap bottled water in Athens (at least at 5 Star Day). And notice that no government agency had to pass a law or provide the water directly itself. These things just happen when people find their own solutions to problems. U-N-I-T-Y...
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"And notice that no government agency had to pass a law"
I applaud them for doing so, but had it not been for the govt being forced to manage our water resources by forcing people to cut back (through outdoor watering bans etc --which some are still flaunting) such measures by Five Star day would not have happened. I suggest you read Tragedy of the Commons if you have not already: the govt frequently must instill "market discipline" because individuals themselves will not.
The 'Tragedy of the Commons' is what happens when private property is not in force, but something is owned in 'common.' You are completely misapplying the principle, and thus the tragedy.
As to the government 'stepping in' and getting us to manage our water usage, this is simply what any water company would do, whether government owened or not.
In Lexington, KY (I moved recently), for instance, the water is managed by a private company. There has been a drought here, too, and they have also taken precautions (including suggested self-rationing) in light of it. It's not like the ACC Water Business Office did something special (that must be credited to 'government management' per se).
The Tragedy of the Commons is what happens when each individual seeks to maximize their own use of a finite good w/out regard for others. It can happen w/ either privately-owned or publically-owned goods (like water) --it is neither the result of types of property ownership (public v. private) nor solved by one type (I am assuming you would argue 'private' property rights). It is when individual use of a finite resource undermines the public/ common good. Typically the mechanism for maintaining some modicum of restraint (and thereby preventing such a tragedy) in this is through govt edict/ action due to the inability of each individual user to restrain themselves.
Incidently, the concept has been so abused by those who argue that private property rights and lack of govt regulation are the solution to everything that Garret Hardin (its modern exponent) opined once that he should have called his book "The tragedy of the unregulated commons."
If there's more bottled water in Athens, then there's also more of those bottles, which should be properly recycled.
But, uh, Xon, I'm confused. If rationing is what any water company would do, government owned or not, then is it within your distinctions of public and private rights to note that a public utility can behave in a market context just as a private utility? Point being: what is the distinction between public and private, if either can act sensibly in the context of the scarcity of resources?
Unless you're saying the public company is acting like a private one...
One could also point out that, while this move by Five Star is a really good one in terms of conserving water, it's a bad move in terms of the number of plastic bottles it uses. That's the problem with bottled water. On the other hand, short of buying water from another county in bulk and trucking it in to Five Star, which would waste gasoline and time, I don't see a better solution.
Anon, I apologize for getting a little too hot and bothered about the Tragedy of the Commons. I have read a good bit on the subject, but it has been a while. I see now that I was putting my own 'Austrian' conclusions in as though they were part of hte principle itself. Sorry about that.
Polus, it's not so much that both managers (private or public) are acting sensibly when they try to impose rationing. I actually think that imposed rationing is a bad idea, no matter what. But the point is that the basic impulse when something is running out--Oh my gosh we have to ration it--is common to everyone. It can hardly be used as proof of the advantage of having a public water utility. When the water supply starts running out, everyone starts saying the word 'ration.'
Hillary (and Polus), sure more bottled water means more plastic bottles. But as you concede, Hillary, sometimes nonideal solutions are still the best available. If we are really desparate for water (this is the point, right?), then too many plastic bottles is a problem worth bringing on to worry about another day. That's economics in a nutshell: priorities.
"Anon, I apologize for getting a little too hot and bothered about the Tragedy of the Commons. I have read a good bit on the subject, but it has been a while. I see now that I was putting my own 'Austrian' conclusions in as though they were part of hte principle itself. Sorry about that."
No problem.
I wasn't making some rhetorical point that public utilities are better than private ones. I am instead making the point that rational agents can act the same regardless of whether they are public or private, so there's no need to make "the bureacrat" a worse thinker-of-the-bottom-line than "the entrepreneur."
If, though, rationing is a bad idea, would you say that jacking up prices is definitely not rationing?
"so there's no need to make "the bureacrat" a worse thinker-of-the-bottom-line than "the entrepreneur.""
Nail hit squarely on head by Mister P.
Charles/Mr. P, as I've said before in these conversations, the difference in the two decision-makers is not the people themselves, but their circumstances from which they try to make the decision.
A central planner under socialistic conditions, by definition, does not have access to market prices when he makes his decisions. This is why his decisions are not 'rational;' because without the approximating indicators of prices the planner has no idea what course of action really is most efficient. There is no possible way to know this if you are making this decision from the position of a central planner in a socialistic system. The smartest person in the world could not do it, b/c the clues to knowing what is most efficient (prices) have been removed.
Private entrepeneuers have access to prices to give them information, and this information gives them a reasonable approximation of what the most efficient course of action is. That's the difference.
Imposed rationing, as a general rule, is a bad idea, but it happens under both public and private scenarios. And the reason I referred to 'imposed' rationing is because the price mechanism could also be seen as a form of rationing. But I would call that 'self-rationing', not 'imposed rationing.' These are just the labels I came up with on the fly, and not hills I'm looking to die on.
Hurricane hits, refugees come to Athens, hotel operators raise their prices. The result? Hotel rooms are distributed more efficiently than they would have been under the lower prices. In this sense, the higher prices caused people to 'ration' their own use of the product and this is a very good thing.
"A central planner under socialistic conditions, by definition, does not have access to market prices when he makes his decisions. This is why his decisions are not 'rational;'"
But you start off your analysis by assuming that the market allocates goods rationally. It all depends on what your definition of "rational" is, which is why all economics is ultimately about ideology, not rationality (or, heaven-forbid, "science"). Your value system determines what you see as "rational" --is it "rational" that people who can't afford food starve? Yes, if you assume ability to pay should determine ability to eat; no if you assume that people should not starve just because they have no money.
Hurricane hits, refugees come to Athens, hotel operators raise their prices. The result? Hotel rooms are distributed more efficiently than they would have been under the lower prices. In this sense, the higher prices caused people to 'ration' their own use of the product and this is a very good thing.
If you can't recognize how craven and cold this sounds then, well, I don't know.
JMac, no offense but I thought we were having a rational discussion. I didn't realize that I would be criticized based on how my words 'sound' to you emotionally. Either I'm right, or I'm not.
But since you asked, I know that people THINK what I'm saying is craven and cold, but I don't think it is because I've studied the economics of the matter. And almost any person who takes an econ 101 class and asks their professor about this matter will get a similar answer (I don't think most econ 101 type classes go into this sort of situation, though).
Your solution, I presume, is to force hotel owners to charge the same prices they normally charge. But then the first hundred people to drive into town take all the hotel rooms, instead of perhaps pooling resources and crowding together (family of 4 takes one room instead of 2 rooms, two friends or even strangers agree to share a room, etc.) First come, first serve, and those refugees who make it into town later are out of luck.
Under what I'm saying, more rooms go to more people. That's a bad thing? Or are you just objecting to the way I said it?
Anon,
What is 'rational' about using prices to decide how to allocate resources is not that it lets poor people starve. Rather, it's that when poor people are starving it creates a natural 'market' for cheap food. (It needs to be cheap since the people with the need for it are poor). If anyone can find a way to supply all these people with food at low cost, then that person can make a killing. This motivates producers and investors to put more capital into lines of production that look likely to cost-effectively meet this need.
As opposed to the central planner, who says something like "Oh my gosh, people are starving! I have to DO something!" And then he does....what, exactly? Take food by force from someone and give it to the poor people? Declare by law that the food has to be sold at a lower prcie? This will create an even worse shortage of food, which I thought was the problem we were trying to solve. Furthermore, the central planner won't have any way of knowing whether the 'solution' he puts in place is actually cost-effective and efficient or not. And if it isn't, this is no small matter; it means that resources that could be put to other important uses are being wasted on his 'feed the people' plan. Perhaps he succeeds in getting all the poor people fed (though if you look at the history of socialist economies, that's not likely), but now they don't have enough clothes, or water, or shelter, etc. So now he has to reallocate resources back into meeting those needs. But he doesn't want to take too much back away from his food plan, so he's in a pickle. Again, with no price mechanism giving him information about what lines of production are more valuable across the society than others, he has no idea how much to pull out of some projects to give to other projects. He has no idea, when he inevitably goes wrong, of isolating where he went wrong. Prices provide an imperfect guide for these sorts of questions; socialism provides no guide at all.
"Rather, it's that when poor people are starving it creates a natural 'market' for cheap food."
Not if they don't have any money or if the food producers decide it isn't worth their collective bother to produce food for poor people who don't seem like a potential market or if there is no profit in it (in other words, if the cost of production is greater than what people can pay w/out some public subsidy). Look, you clearly like markets --are enamored of them, even. But your argument is ultimately tautological --markets are by definition good therefore they solve all problems and bring only good things. This may work fine in the classroom of econ 101 but not in the real world. Markets are good for somethings (selling toothpaste) but not for others (allocating healthcare or education).
And, btw, if you can actually find a "socialist" country --rather than keep harping on and on about the centrally planned economies like, I am assuming, the USSR (which was never socialist in the way in which Marx understood the term)-- then that would be a better basis for your argument. Given that many argue that the USSR et al were really state-capitalist, then your argument falls flat.
Don't mean to sound so mean, but the argument that markets solve all problems is tiresome, because it is a) patently false; b) ideological but presents itself as a non-metaphysical eternal truth; c) articulated by people who say that whenever some part of the market isn't working "as it should" (which rational people would take to be market failure) also say that the solution is more market --this is like arguing the inconsistencies in the Bible w/ people who believe the Bible infallible; any rational person sees there are myriad inconsistencies, but the true believer always has a contorted set of positions to go through to show there aren't when, in reality, application of old Okham's Razor would be the best position to take.
Nice work, Xon. Every time I tried to reply, I then saw you had already said what I wanted to - only a lot better than I could have.
After reading Maddox's name brought back up recently on Johnathan's blog, I went back to the time when I wrote about him on my own, and came across one of our unfinished conversations about price and the marketplace that was part of that same post, so it's a bit weird to be rehashing that conversation again, which all just goes back to show us that you and I probably don't come to conclusions on this because of just how differently we argue and think about it.
As it stands, it seems to me quite clear that there is this fundamental flaw in your separation of the "planner" and the "entrepreneur," and it has to do with your insistence, which anonymous is right to call into question, on price as a determining value. But why it's not clear to you that you have this flaw, I'm not sure.
So, let me try my best to illustrate it, and in doing so, I'll refer you back to that earlier conversation, where my argument is still essentially the same. And, to be a real bitch about it, I'll say that you are entirely correct here: "These things just happen when people find their own solutions to problems."
Now, you say that entrepreneurs have access to market prices, whereas planners in socialistic conditions do not, and so, and correct me if this characterization is wrong, they are judging resource distributions blindly and irrationally. But, as anonymous points out, and as I know you the sometimes presuppositionalist do somewhat agree, the basis for determining prices has to be an ideological one, where for the entrepreneur the scheme to determine value is: what amount of profit can be made from selling food to starving people who have little to no money to purchase food? The ideological mechanism there is the sense that no undertaking is worth undertaking unless it generates profit, because it is irrational to misallocate resources in an economy of scarcity, whether planner or entrepreneur. You solve the problem of bureacratic inefficiency by pointing out that entrepres have prices, and since prices are determined through market exchanges whose chaotic fluctuations (super?)naturally produce well-ordered prices for well-ordered products, prices are the best means for gauging the value, not so much the worth, of a thing.
But that assumes something you denied as an assumption from the outset: you said we were in the land of socialistic conditions, not free market conditions. I think you are philosophically-equipped enough to see the inherent problem in assuming the necessity of market-derived "prices" in the framework of socialistic conditions where planners (why again this "the centralized planner," when the entrepres are a group of agents? It's like you've left completely unproblematized your (odd) insistence on the One versus the Many in this economic context after our last discussion about that...) are managing the distribution of resources.
Again, I do not see why the planners could not notice that individuals living in urban areas, to just make up numbers, use 350 000 gallons of water collectively per day, the energy production facilities 1 500 000 gallons, the meat production 950 000 gallons, the educational institution 450 000 gallons, and compare that to the water capture of 3 350 000 gallons and see that an upcoming lull in means to capture water will require some reduction in the water use for the entire community. Why is it so alien, because wouldn't it be alien?, for those under socialistic conditions to simply bypass the market habit of falling upon prices and arrive at use itself as determining how to coordinate the allocation of resources?
The thing is, and again has been my point, you accept that people will "self-ration" usage when they notice the scarcity of a resource: water companies will ration whether private or public. Where you chafe at imposed rationing on consumers ("I refuse to allow you to purchase what you can afford") you applaud at self-rationing by sellers ("I refuse to allow you to purchase any amount under my minimum price that I have raised to be just over what you can afford"). Raising prices is a form of rationing, obviously, as it drives down the rate at which the resource is depleted in a condition of scarcity. But use some other terminology if this bothers you.
So then, the miracle of the marketplace, and it truly is a miracle (and is why I think you need the market to comprise several agents and talk about entrepres rather than the entrepre), is for somebody else to step into the dynamics of the situation and provide a comparable product for sale at a lower price ("I am happy to provide you with a comparable product with a maximum price lower than the other guy's minimum, but it will be of lower quality."). But because a One planner cannot multiply himself, then there is absolutely no mechanism in place for the planner to provide a comparable product, because there is only a One product for a One planner (everyone gets water, but no variation in quality, as we'd find in the marketplace, where there is variation in quality. Again, there's this assumption of market conditions when we're supposed to be thinking in socialistic conditions...)
This is a lot to say that, under socialistic conditions, the planner doesn't need access to prices, because the methodology for arriving at facilitating people what they need is done on the basis of what they are doing with that need. As you already admitted, and as the Mises/Austrian approach ratifies, people in the face of scarcity behave rationally by curbing how much they are going to use that resource. Sometimes, people crazy-go-nuts and deplete the resource much faster if they think it won't last, and this phenomenon is altogether evident, as I said in that older thread, by the imposition of time on consumers through ads that threaten us to "Hurry, while supplies last!" You also see it when milk and bread fly off the shelves when a hurricane is supposed to hit. And, as I argued there, control of the exchange can be generated by mastering the way people perceive the scarcity of the resource, as no doubt people think that the water drought in NEGA is an occasion for governments such as ACC to seize control of how people live their lives.
Which, in this context, is not to suggest that I'm thinking this is all one big scare over nothing, but is to say that I think your argument here is just wrong. I do think you're right: people get to doing interesting things to solve what they perceive as problems. Where I think you go wrong is in thinking that, a priori to the marketplace and the socialistic system, there is the marketplace.
And where I think you are blind in this argument is in saying this: "This motivates producers and investors to put more capital into lines of production that look likely to cost-effectively meet this need." People, in craven and cold Austrian economic conditions, are not motivated by the perception of other's needs, but by their own perceived need. Correct me if I'm wrong about that part, too. Consumers do not create their own suppliers upon recognizing their own needs, but are dependent upon other people recognizing their needs and taking steps to both produce for that need and profit from it. (Otherwise, the non-profit activity is just charity, which apparently doesn't exist under socialistic conditions, in Austrian or Xonian accounts of them.) In a free market, that is completely free and uncoerced even by moralistic preachers, entrepreneurs will only cater to a specific need if there is some profitability to it, or is that wrong? And, the entrepreneurs can only do this if they perceive the need. So, it will only be that the entrepreneurs will invest the time and resources into producing for the poor who cannot purchase the more expensive products if they not only perceive the need but perceive the need's satisfaction as profitable for them. And, apparently, feeding the starving at even dramatically reduced rates is not profitable for any entrepreneur, or else it would have been done already.
And, in the end, that's the problem. It's not that the free market is immoral, because it isn't as far as I'm concerned. It's rather that since the driving force to the marketplace is in the hands of people, and you readily admit your assumption of the stupidity of people to calculate exchanges efficiently, whose motivational interests are deriving profit from what they perceive as supplying for the needs of others, it requires them to attempt undertakings based upon their desire to benefit financially and how they believe those benefits will come to them. It's not that the market will produce entrepreneurs who produce and distribute/sell really cheap smush to the poor who cannot afford beef and red leaf lettuce, but that it only does so if people think there's money to be had in doing that.
And since there's more money to be had in selling addictive products or coercing consumers into their purchases, supplying less profitable wants on a mass scale takes a back seat to the more profitable ones. The marketplace does all of this, though, without any moral judgment of itself, and even money itself carries no condemnation for who weilds it. Money happily points to a future without concern, it builds itself up "for a rainy day." People want that kind of security, even to where we think that the appearance of money as a valuation of a thing is assurance of what that thing is worth: it is the guarantee the transaction was just. It's insidious how it sneaks itself into even the most upright of lives. The old man I think was right to point this out to us, when he questioned if we could serve money or God.
But I've followed along too many tangents, and you have a kid to raise.
Yeah, the Bible not being infallible is a bad example to use with me, since I am an inerrantist. :-)
But leaving that aside, my argument is NOT tautological. I mean, believe it or not I'm trying not to completely 'hijack' the thread as this is not the place to spout off long explanations of how the market works. But that means that I'm leaving things out to be polite, not becuase there's not more I could say.
Even what I HAVE written here is not tautological, though. The price mechanism found on the market leads to a more efficient allocation of scarce resources because, as I have said, the price mechanism actually does something that a non-priced economy cannot do. I didn't just say "market is good b/c market is good," which would indeed be silly. I could elaborate further on what the price mechanism does, but I've at least sketched it out.
However, to press your own point again, I don't see where you have provided any explanation of how the market leads to inefficiencies. You have simply claimed that this is so, and have declared my position to be 'patently false'. But that's not much of an argument on your part, either.
I have argued myself plenty of times in the past that 'true' socialist economies are hard to find. Most 'socialist' economies are really 'mixed' economies: there's a market which is then intefered with by the government. I have said this many times myself. (The only 'genuine' socialist economies that I am aware of are the earliest phase of Bolshevik sovietism--1917-21, or so; and Pol Pot's Khmer Rouge in the 1970s.)
But I follow the Austrian school in holding that mixed economies have the same problems of all-out socialist economies, just on a smaller scale. They introduce widespread inefficiencies in resource allocation, and the people suffer as a result.
I'd like to respond more specifically to your example of starving people, health care, and education. But I've gone on long enough for now, and I think my general position is clear.
Obviously, my last comment was written in response to Anon.
A response for Mr. Charles Polusplagchnos J Pufrock McGee will have to wait for later, because I'm grading tests.
Well, I'm supposed to be sleeping, as I have to work tonight.
"Even what I HAVE written here is not tautological, though. The price mechanism found on the market leads to a more efficient allocation of scarce resources because, as I have said, the price mechanism actually does something that a non-priced economy cannot do."
But this is where you fail to see your own ideology at work. Your definition of "efficient" relies upon the following interpretation: the "efficient" allocation of goods is done via prices; anything allocated not according to price is therefore "inefficient". Ergo, in Xon world, "efficient" = allocated according to price = "efficient allocation". It's tautological through its definitional terms.
As to market failures, any time someone dies of hunger because they cannot pay for food, does not have a place to live because they cannot pay for lodging, or dies because of lack of healthcare because they cannot pay a doctor represents such a market failure. There are myriad others.
But this is where you fail to see your own ideology at work. Your definition of "efficient" relies upon the following interpretation: the "efficient" allocation of goods is done via prices; anything allocated not according to price is therefore "inefficient". Ergo, in Xon world, "efficient" = allocated according to price = "efficient allocation". It's tautological through its definitional terms.
But I provide an argument for why prices allow for more efficient allocation of resources. I don't just define efficiency as "that which comes about when prices do their thing." We could, in principle, talk about 'efficiency,' come to a definition of what we're talking about, and then examine prices to see how they do at accomplishing it. And my contention is that, if we did that, prices would do quite well. Socialism less so...
As for market failures being defined as any time a person dies b/c they couldn't afford food, okay if that's your definition. But what do you call it when a person dies because the government which said they would take care of them fails to provide them with sufficient food?
"But I provide an argument for why prices allow for more efficient allocation of resources. I don't just define efficiency as "that which comes about when prices do their thing." We could, in principle, talk about 'efficiency,' come to a definition of what we're talking about, and then examine prices to see how they do at accomplishing it. And my contention is that, if we did that, prices would do quite well. Socialism less so..."
But this is an ideological position, and that's all. It depends on how you define "efficiency" and what your goal is. If you do so (defining efficiency) from the basis of believing prices are the best basis for determining resource allocation then anything done via any other mechanism is, indeed, by definition, "inefficient." If "efficiency" is defined in some other way --eg the inability of people to meet their full human potential due to lack of ability to pay-- then allocating resources according to price is not necessarily efficient. My (probably pedantic) point here is that the "market" is only viewed as efficient if you define efficiency in a particular way. The key, then, is about definitions of efficiency, not some mythical essence of markets themselves. Your position is that prices are, inherently, the basis for determining efficiency (which is why you make the last statement in your blurb above --you have decided ideologically that prices are the most efficient way of allocating resources, rather than proven it empirically). Mine is that how we understand what is an efficient allocation is solely determined by how we define efficiency, not the result of something inherent to markets.
"As for market failures being defined as any time a person dies b/c they couldn't afford food, okay if that's your definition. But what do you call it when a person dies because the government which said they would take care of them fails to provide them with sufficient food?"
I call that a failure of govt.
And do you believe that government is perfectible? If it is not, then what is your case for preferring the inevitable gov't failures over market failures, since apparently we have to live in a world where some failures will take place?
As to your other point about definitions of efficiency, yes I think you are being a bit pedantic. If you want to have a discussion about the definition of 'efficiency' then all you had to do was ask nicely and we would already be doing it. :-) But telling me, without having heard my defintiion, that my argument presupposes a particular definition doesn't really make any sense. In some pedantic sense (as you feared) that might be true, but only insofar as every person's position about everything is largely built upon their definitions of the concepts involved in the position. This would be just as true of you and of the Easter Bunny as it would be of me. But other than that, it doesn't really make much sense to tell me that my position is 'ideological' because is only true if my definition of efficiency is true, all the while claiming that you have no idea what my definition of efficiency even is.
I have not "decided ideologically that prices are the most efficient way of allocating resources". Not in the slightest. I have found myself persuaded by an argument that, on a particular understanding of efficiency (which strikes me as both reasonable and desirable), shows market forces to meet that goal. It's nothing 'mythical' about markets, it's just the way they are which produces certain results, and those results are more efficient.
If you want to flatten something, a steamroller will do a good job. This is not because of some 'ideological' decision I have made to be an advocate of steamrollers, such that I then reverse-engineered some definition of 'flatten' which makes the steamroller look like a better instrument than it actually is. That would be a silly analysis, wouldn't it?
"And do you believe that government is perfectible? If it is not, then what is your case for preferring the inevitable gov't failures over market failures, since apparently we have to live in a world where some failures will take place?"
No, I don't, and I don;t necessarily prefer govt failure to market failure --both are bad. My point is not to argue counter-point to your point --you think markets are the best way to allocate resources therefore I don't. I just want you to see that your arguments about markets and prices being the most efficient way to allocate resources is completely dependent upon one's definition of "efficient". Mine is an argument against the kinds of essentialism that I have seen you profer in myriad posts here concerning markets as, ultimately, the best way to allocate resources efficiently. If your argument is not that markets are, in fact, the best way to allocate resources efficiently, then that is a different matter. Am I to take that you don't, in fact, believe markets are such?
"But other than that, it doesn't really make much sense to tell me that my position is 'ideological' because is only true if my definition of efficiency is true, all the while claiming that you have no idea what my definition of efficiency even is."
Something doesn't have to be true (or false, for that matter) to be ideological. Again, my argument w/ you is that I think you fail to see that your starting point is an ideological one --your conclusions about markets stem from your definitional starting point. That's true for all of us. But my point, I guess, is to challenge the belief that markets are, ipso facto, more efficient allocators than other ways of doing so. You can only "prove" that prices are the most efficient way of allocating resources based upon a completely ideological starting point about "efficiency". How you define efficiency shapes completely what you think is efficient resource allocation. Given that, then markets are no more "efficient" in any absolute, essential, transcendant sense than are any other ways of allocating resources --if efficiency were based upon making sure all people w/ black hair got resources, then when people w/ black hair got resources, that would be efficient; if people w/ red hair got them, it wouldn't. Once it is admitted that markets are no more "efficient" in any absolute, essential, transcendant sense than any other way of allocating resources, then they no longer become the de facto "best" solution to matters of social distribution of goods --again, unless I am mistaken you have pretty much toed the line that markets de fact are the best way of allocating things.
"As to your other point about definitions of efficiency, yes I think you are being a bit pedantic. If you want to have a discussion about the definition of 'efficiency' then all you had to do was ask nicely and we would already be doing it. :-) But telling me, without having heard my defintiion, that my argument presupposes a particular definition doesn't really make any sense. In some pedantic sense (as you feared) that might be true, but only insofar as every person's position about everything is largely built upon their definitions of the concepts involved in the position. This would be just as true of you and of the Easter Bunny as it would be of me. But other than that, it doesn't really make much sense to tell me that my position is 'ideological' because is only true if my definition of efficiency is true, all the while claiming that you have no idea what my definition of efficiency even is."
OK, I really have no idea what you are trying to say here. Except that the question of "efficiency" is key to everything --that's the epistemological starting point, not the ontological status of markets.
"If you want to flatten something, a steamroller will do a good job. This is not because of some 'ideological' decision I have made to be an advocate of steamrollers, such that I then reverse-engineered some definition of 'flatten' which makes the steamroller look like a better instrument than it actually is. That would be a silly analysis, wouldn't it?"
yes, but this proves my point. If you want to flatten something --or make sure resources are allocated according to ability to pay (your definition of "efficiency")-- then a steamroller --or market-- is the most efficient way of doing it. If you want some other goal then it isn't necessarily the most efficient way to do things.
Hi again, anon,
It's strange being 'informed' of things that I have spent years arguing for myself. I don't believe it's possible to be unbiased, I believe we all have presuppositions, and these presuppositions shape our worldview often in ways we don't even realize.
All that said, though, it's still possible for people with different views of a matter to have a conversation and come to some sort of mutual understanding. But cross-accusing one another of having 'ideological' commitment to their own narrowly-crafted definitions is not particularly helpful.
For one thing, you admit that "this is true for all of us," which makes it odd to call me out on it. For another thing, I don't hold that opinion of you. I'm operating under the assumption that you can put your economic 'philosophy' together in a coherent way that does not simply follow tautologically from pre-engineered definitions.
But, obviously and certainly, definitions are important. So while I think we're still talking past each other a bit, maybe we should proceed to the definitions of efficiency.
Most economics texts I have read give a definition of economics something like the following: economics is the study of efficient distribution of scarce resources. But what does 'efficient' mean?
The first approximation of a definition is simply that'efficient' means that resources are allocated in order of their more valuable uses. So, if society (taken as a whole, whatever exactly this means) had only five values and they were ranked in order of importance from V1 - V5, then an efficient allocation of resources would occur when V1-V5 were able to be satisfied to the happiness of society as much as possible. Depending on the amount of resources available, this might mean only that V1 was fulfilled while V2 - V5 were never gotten to. Or it might mean that V1 and V2 are met, but V2-V5 are left out. Or it might mean that all five Vs are met. But the 'most efficient' allocation of resources is that they go to the most valuable resources first, and work their way down as far as they are capable of going.
So the real question of our discussion, as I understand it, doesn't hinge on our definition of 'efficiency' so much as on a definition of 'value.' What, exactly, makes somethin valuable, and how do we determine what the hierarchy of values is? What is V1 in our society, and what is V2, etc.?
This is the real locus of the debate it seems to me, as 'classical school' economists (from Adam Smith to Karl Marx) all held to some form of 'objective' value, most commonly the labor theory of value. So the true objective value of a good is the amount of labor that went into producing it. You're 'goal' on the market, then, is to trade your labor-product for someone else's labor-product in a way that benefits you; i.e. you benefit if you the labor-product you get took more labor to produce than the labor-product you gave up.
I'm following the Austrian school of economics (which I DO have quibbles with, but for our purposes here they don't matter I don't think), which rejects all objective notions of value. Austrian economics treats the field of study as value-neutral. Values are inherently subjective. The 'value' of a good or service is nothing more than a function of how it is in fact valued. If Bob wants the vase, then the vase has value for Bob.
Obviously, in the real world we have more than just five values floating around. We have millions of citizens who all have their own hierarchies of subjective valuation. What we call 'the market' is just the accumulation of all those individuals, interacting with one another according to their own system of values.
John values living close to family more than he values making more money. Suzy would take a pay cut to get away from her family. Jeff is torn on the issue, and needs to look at more details before he makes a decision. The end result of all these people making thousands of personal decisions each day is 'market prices.' (That point is obvious, but I don't want to leave anything out if I can help it)
My house is not worth anything but whatever I can get someone to agree to pay for it. It has not 'objective' value to speak of at all. Although certainly we can often make an educated guess what price it will eventually sell for, and so in that sense we feel like it has an 'objective' value. But really it doesn't. If I can't get anyone to pay me 150k for it, then it's not worth 150k. Values are subjective.
So back to efficiencny. Efficiency is, as I've always understood the term, the allocation of scarce resources in order of their most important uses. Their most important uses are generally (I'm not aware of exceptions here, but I'm not an expert on all what all economists think so I might just not be aware of somebody) defined in terms of their value. The question then is what gives things their value. The answer of many schools of thought is that some objective factor or combination of factors gives them their value: how much labor went into making it, how much money went into making it, how many natural resources went into making it, some combination thereof, etc.
The Austrian school understanding is that nothing gives things any kind of 'objective' value; rather, they are valuable simply because they are in fact valued by someone. To that person, the good has value. To someone who doesn't value it, it has no value.
So efficiency on the Austrian understanding occurs when scarce resources are distributed in order of the those uses which the people in society value most. There is no 'objective' or 'right' answer here.
Of course, since human beings in general want to survive and since certain things are necessary for survival, there are certain things that are always going to be highly valued in a society. Food, water, shelter, clothing, etc. These things are all at the 'top' of most people's values. Before we do anything else, most of us make sure we have enough to eat and drink, a place to sleep, clothes to wear. After that, we all go our separate ways as far which things are more important.
What prices indicate is how much people value certain goods and services. They indicate this imperfectly, to be sure, but they are good approximators. If a bunch of people in Athens suddenly get a craving for oranges that they didn't have before, then oranges move up to a higher slot on their list of personal values. The result is that we say the 'demand' for oranges has increased in Athens. This means that oranges can now be sold for a higher price. Because these higher prices mean, ceteris paribus, higher profits for the orange producers, the higher prices send a 'message' to the producers: more oranges in Athens! To capitalize on this newfound opportunity, producers send more oranges to Athens, and the pepole in Athens who have the extra craving get their new higher demand satisfied.
On Austrian terms, this is efficient, because people who want oranges more are getting more oranges. Oranges are a scarce resource, there are not enough of them in the world so that every person can have an unlimited supply. The oranges must go somewhere, to those who value them more highly.
Now, it seems to me that those who disagree with this are going to have to say that there is something wrong with the people who value the oranges more highly. If you don't like the market result, then what you are saying is that the people in the market are misvaluing some goods and services. Perhaps you believe that oranges are actually bad for people, and they should really eat more apples. And so you are not happy with the market, b/c it has led to people in Athens eating more oranges, and so you call this a 'market failure' and you call for legislation to come in and regulate and tax oranges to try to swing consumer demand back towards apples. But what exactly would be the argument that there is something wrong with folks valuing oranges more than apples?
Even if you were right that oranges were less healthy, so what? Aren't people in a free society allowed to decide for themselves whether or not they want to eat a less healthy food? Again, this is just people's subjective values at work. Many people value the pleasure of eating tasty oranges now more than they value avoiding the added risk of future health complications. Who is to say that these folks are 'wrong'?
But if there is not basis on which to argue that these valuations are wrong and should thus be overridden, then there is no basis to regulate this market activity. People want oranges; let them buy more oranges. This distributes oranges more 'efficiently' (b/c oranges, a scarce resource, go to those uses that are more 'important'; i.e., they get eaten by the people who want them more).
And if this reasoning works for oranges, then it seems to me that it works just as well for health care or education.
Finally, the question of the very poor. Most of us have our own experiences with poverty, either through direct experience in our own lives or through interactions or friendships. Poverty sucks. "Hear me God, it's Hell to be poor!" But unfortuantely I think Jesus wss right when He said that "the poor you will always have with you." I don't believe that wars on abstractions can ever be successful, and the war on poverty is a war on an abstraction. As long as we live in a free society, there will be poverty, if for no other reason that some poeple will use their freedom to take unprofitable risks with their money. But there will also be many who 'climb' out of poverty, too. In fact, there have been studies dones over the decades, and in the U.S. if you look at folks who were in the bottom quintile of wealth 30 years ago, 90% of them are in a higher quintile today. There is a great deal of upward economic mobility in this country. But there are always new folks to come into the bottom quintile, and thus the long slow climb begins again for them. But our tendency today is to simply bemoan the very fact that there is a lowest quintile.
If someone is so poor that they cannot afford food, there are two choices. Trust the free interactions of people under market conditions to take care of them (through charity and the like). Or trust the government to take care of them.
Both scenarios will fail to provide for every single person. This is not a perfect world. People die. It sucks, I hate it, let us share in the grief of others. Governments have a far worse track record here, and I think there are 'philosophical' reasons for doubting them no matter their best intentions. But, even if I am wrong about those philosophical reasons, the fact remains that, historically, societies that try to 'take care' of all their people's needs tent to have more starving people than more marketish societies, not less. In the market, starving areas get more grain shipped to them because of profit motives and the indications of prices. People who cannot afford to pay the higher prices of grain can often find help through the charitable, who will buy up the more expensive grain in order to give it to the less fortunate (this too is a market activity; charitable people value the 'good deed' they are doing more than they value the money they are spending on the grain that they are giving away; ain't freedom great?). Of course, imperfect world that we live in, it is still possible that some people will not have thier needs met, through non fault of their own. When you are poor, you don't have the resources to buy very many of the goods and services on our personal list of values. YOu can only afford the top few items, and all other things must be forgotten as luxuries. If you are very poor, then you cannot even afford the top item on your list (probably food), and so you starve.
But when the government runs the whow, things are even worse. Things often get politicized; more grain to this region, less to that area, all in the service of special interests. Planners are not sure how to allocate in such a way that peole's highest values are met. they know that people are currently starving (which obvioulsy mans their highest values aren't being met), but they don't know exactly what to do about it. Every step along the line of production requires decisions about which the planners have too little information. Anecdote: India during a famine a few decades ago. They had plenty of grain to feed the people, but it rotted in warehouses on the other side of the country while people starved. Why, b/c India's gov't was evil? Not at all, they weren't evil they were human. And humans cannot possibly keep track of all that is necessary in order to distribute resources to those who want them most. Not unless they have prices to help them.
I'd be more sympathetic to those who call for the gov't to come in and 'correct' the market's 'failures' if those government corrections weren't usually so freaking horrible in their results. FDR 'saves' our economy by paying farmers not to grow food during a depression, and we all applaud him like he was a genius. "If the market has its way, people will starve! So let us run the show, even though that still means that people will starve!"
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