[farrell2k]

BenignDesign, on 07 January 2013 - 07:31 PM, said:

I have to hop on LoD's bandwagon here. I've been raising my children on my own for 10 years. The first half of that was spent working shit jobs for a little over minimum wage.

I spent four years as an assistant manager at Cinnabon on the Pennsylvania Turnpike pulling in a whopping $6/hour. YOU try feeding 3 people on that wage.

I, however, refused to swallow my pride and apply for food stamps or medical assistance or section 8 housing. I scraped by on what I had. When I bought groceries, I bought them with the kids in mind - how much of a, b, and c do I need to feed the kids? When I made dinner at night, the kids ate first. I had any scraps that remained - a fish stick and two bites of mac and cheese, or half a chicken nugget and a handful of fries. I was thin back then, but I was very, very, painfully hungry. The bulk of my daily food intake was a free Cinnabon for lunch during my work shift.

The only assistance I accepted was a child care subsidy because without it, I would have been paying out more for daycare for two toddlers than I was bringing home in a pay period. Without that subsidy, I would have been unable to work.

While I'm happy that you, P4P, have never had to want for anything in your life, never had to hang your head and walk into the office of shame, never had to scrape together pennies to put gas in the tank and hope against hope it would be enough to get you home in a blizzard with tiny, dependent people in the backseat, we have not all been so fortunate.

I wish you would have applied for assistance - you were exactly why it is there, and I am happy to contribute taxes toward it.

P4P and people like him will never understand the need for social services, until they need them. It's just pure ignorance.

[atraub]

Python_4_President, on 07 January 2013 - 04:09 AM, said:

atraub, on 07 January 2013 - 01:39 AM, said:

a few roads in houston aren't good, therefore p4p is an expert on highway maintenance />/>/>

Tell me about the history of America's roads, Atraub. Tell me about the people that laid the ~60 million miles of them. How many of those miles are you responsible for? How many miles have you traveled on them?

You caught me, I have not fulfilled my civic duty to be pave roads therefore, your suggestion to use US citizens as slave labor isn't the most retarded thing anyone has ever suggested, ever.

[CTphpnwb]

macosxnerd101, on 07 January 2013 - 03:55 PM, said:

Quote

No, you're assuming that the Economic system is a natural result of some sort of natural law, but it's not. It's not like the weather: it's all completely dependent on human beings, so we're all responsible for the results. Since with power comes responsibility, those of us with more power are more responsible than the rest.

It's very natural. Economic actors move to maximize utility.

You're describing actors and actions, and yes, they are natural but the system is not. The system is an abstract construct created by humans for humans. Our biggest problem is that we're allowing a small group to make the system's rules fit their needs/wants at the expense of the rest of us.

[jon.kiparsky]

Actually, no, you're simply wrong there. This is not a construct that people made up, it's not a recent thing, and it's not just about trade. You'd have as much luck arguing that evolution is a construct people made up, because the two share a lot of the same descriptive mechanisms. In fact, the "utility bundles" that mac talks about in economics are also used quite effectively in describing evolution of species, and also (oddly enough) in predicting rainfall patterns over coming decades.

To say that economics is "an abstract construct" is to suggest that we can change it at whim. We can't. We can regulate the mode of exchange - we can trim the rules and change the payouts - but the basics are not under our control. Supply and demand is not a suggestion, it's not legislation, it's a descriptive law.

[macosxnerd101]

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we can trim the rules and change the payouts

I think that is what CTphpnwb is saying. The technical term is a corrupt economy. Bribery is one way this happens. Is it worth it for an actor to bribe the price setter to adjust prices so he comes out ahead? That depends on the actor's risk behaviors. Is he risk averse (a concave down curve), risk neutral (linear) or risk embracing (concave up)? What is his expected utility when comparing against things like jail time, in addition to the flat cost of the bribe? That's how we would analyze it economically.

I think we're all on the same page though that corrupt economies skew favoritism and don't optimally distribute resources. We could probably come up with a fun little proof for this. I'd need to do some more research into corrupt economies first though.

[jon.kiparsky]

Actually, when I say "trim the rules and change the payouts", I mean things like "outlaw monopoly practices" and "institue progressive taxation". I think those are different from creating a "corrupt economy".

[ishkabible]

CTphpnwb: stop being so liberal

I actually agree that we have something of an oligarchy.

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I'd need to do some more research into corrupt economies first though

I'm pretty sure every economy has been corrupt if it had a government. If you have a person in a position to say "you get this and you get that" you are either going to have corruption or at the very least non-optimal allocation of resources. I suppose the question is how corrupt and the effects of an extremely corrupt economy.

This post has been edited by ishkabible: 07 January 2013 - 09:01 PM

[macosxnerd101]

Taxation and utilization of said revenues don't necessitate a corrupt economy. They do imply deadweight loss though, which affects both producers and consumers.

A corrupt economy is a little different. Consider two consumers with Cobb-Douglass preferences represented by: U(a, b) = ab, where a and b represent quantities of two goods. There are two consumers with initial endowments (8, 2) and (2, 8). A third party sets the prices. If person one gives the third party an apple to set set prices at P_a = 5 and P_b = 1, that is a corrupt economy. Here, bias would lean towards person A, as he could more easily acquire good B, and maximize his utility more than person A. The final allocation would not Pareto efficient (no actor's utility has been decreased, no excess supply and demand); and therefore, not an equilibrium.

In practice, this could be compared to bribing a politician to alter tax laws in favor of a given party.

[ishkabible]

I'm saying that a politician makes choices, of which there are possible choices that would favor one entity over another or no entity at all. Because politicians are human, you will have unnecessary inefficiencies either due to corruption or mistakes.

I'd also wager that sense the only difference between a mistake and corruption is moral that it's not possible to identify corruption from just economic factors. That doesn't invalidate your definition, just that there are possible other factors that could yield the same result.

Also, I got a C in intro to macro cause I payed the minimal amount of attention. I'm not claiming to be an economist or to understand your definition. So, perhaps I just have no clue what you just said and this all sounds like I'm an idiot but mathematical definitions aside I think I have basic enough grasp on what you said for the above to apply.

This post has been edited by ishkabible: 07 January 2013 - 09:31 PM

[jon.kiparsky]

macosxnerd101, on 07 January 2013 - 11:04 PM, said:

Taxation and utilization of said revenues don't necessitate a corrupt economy. They do imply deadweight loss though, which affects both producers and consumers.

This is utter nonsense, I'm afraid. Just as there are natural monopolies in any economy there are also natural socialisms - goods which are more efficiently produced at the public expense and for the public good. We can argue about what those might be, but there's no sensible argument to claim that they don't exist: the counter-examples are too obvious. Private fire departments, over any time scale, are more expensive to the society as a whole (and to each individual member of the society) than public ones.

The utter failure of the American private health care model, and the fact that, by any measure ther than the profitability of private insurance companies, publicly-funded health care produces better results for much less money, shows that there's a second case. We can adduce many other examples, including the old standbys of roads and police departments and so forth.

More controversial cases might involve the costs of social welfare programs, but it's pretty clear that if a society agrees that we'd prefer not to have old people starving in the streets, there are few alternatives. It's cheaper just to shoot them and haul away the bodies, but most people find this distasteful. The utopian dreamers among us might want to rely on private contributions to charitable organizations and perhaps religious sects, but this was shown to be ineffective a long time ago. There may be new ideas that we haven't tried, but public welfare programs are the last man standing at this point. Social security, in this case, has been very effective, and the anarchist party's attempts to break that program do not disprove its effectiveness - the fact that they've so far failed, in fact indicates how well established the program is and how popular it is.

So we have a line of reasoning which establishes that social welfare programs, funded by taxes, are in fact the most efficient way for society to achieve one of the goals which we have generally agreed upon. To disagree with this, you have to ignore economics or an established history of experimental results (for example, the 19th century), or else you simply have to disagree with the goal. If you don't mind having some old people starving in the streets, then I suppose you may argue that social welfare programs serve a goal which you don't wish to see served. Otherwise, you're pretty much out of luck arguing against social welfare programs generally.

That being the case, we can return to the liberal consensus which the post-Reagan right has been trying its hardest to destroy and discuss the most effective deployment of tax revenues to better society, and stop all this indefensible yammering about taxation as an evil.

[macosxnerd101]

Let's use a simplified example. Consider the market for books, where consumers have the demand function based on price D(p) = 100 - 2p, and the producers' supply function is S(p) = 2p. The equilibrium price is the same for consumers and producers, and we know that supply will equal demand. So: 100 - 2p = 2p
100 = 4p
p* = 25

And the equilibrium quantity of books is 50. This means the consumer surplus also is equal to the producer surplus in the absence of taxes. So the surplus for the consumer = (25)(50)/2. The total surplus = (25)(50).

Now consider a tax of $4 per book. As we know, sales tax is charged at the vendor. So:
P_d = P_s + 4 (the consumers will pay the supplier's price plus $4)
100 - 2p_d = 2p_s
100 - 2(p_s + 4)
100 - 8 - 2p_s = 2p_s
92 = 4p_s
p_s = 23
p_d = 27

With taxes, the consumer surplus is everything above the line p = 27, and the producer surplus is everything below the line p = 23. There is a section illustrating where the tax revenues go back to benefit everyone, and then a section for deadweight loss denoted as the two corner triangles. So in the market for books, taxes create loss for everyone. I tried uploading my own diagram, but I'm getting an error, so I had to settle for one I found online. It illustrates the point.



Now if there were two book suppliers and one bribed the government to levy a heavier tax on its competitor, then that would be a corrupt economy and there would still be deadweight loss in the book market. I'm not arguing by any means that certain taxes and social programs aren't necessary and important, but that doesn't mean there aren't consequences in the markets for said taxes and programs.

Quote

Also, I got a C in intro to macro cause I payed the minimal amount of attention. I'm not claiming to be an economist or to understand your definition.

The utility and preference functions are a Micro topic. So if I have a consumption bundle with 8 of good A and 2 of good B, then my utility if U(A, B) = AB, is 16. If I have 7 of A and 3 of B, U(7, 3) = 21. Through trade, it is possible for both consumers to maximize their utilities. The equilibrium point would be the allocation (5,5) for both consumers, with their utilities = 25.

Now if one consumer had the prices set to favor himself, then he could have a consumption bundle of say (6,5) with a Utility = 30, and the other consumer would be left with (3, 3) and a utility = 9, which is less than the initial utility of 16.

[jon.kiparsky]

This is one of those fundamentally dishonest moves that make economists reviled in most civilized circles. (entertaining, yes. necessary, yes. but also reviled)
Yes, taxes have consequences. Everything has consequences. This is not what any normal person means by "deadweight loss": the term is selected to bias the argument, just as c3p0ontheweb or whatever his handle is tries to frame the argument as a conflict of justice versus pure evil. Nonsense in both cases.

What you mean by "deadweight loss" is in fact friction. If you actually meant "deadweight loss" you'd have to take into account what the taxes are buying - which, for reasonable taxation, is in fact more than the loss incurred by friction. This, ultimately, is the argument that we used to have: what taxes are we willing to pay, and for what return. This is the argument a sane democratic society has - it's the liberal consensus, established by people like Winston Churchill in the early part of the 20th century. (when it was noticed that malnourished children didn't make very effective cannon fodder, and that therefore it would be a good investment to institute the dole)
The fact that the anarchists are being taken seriously, and not laughed out of the room every time they open their mouths, shows you just how bizarre our society has become. This, however, does not affect the fact of the matter, which is that free-for-all capitalism, the war of all against all, is not what any sane person actually wants. This is only advocated by those already rich enough to survive mere anarchy loosed upon the world, and their blinkered toadies.

[macosxnerd101]

Quote

What you mean by "deadweight loss" is in fact friction. If you actually meant "deadweight loss" you'd have to take into account what the taxes are buying - which, for reasonable taxation, is in fact more than the loss incurred by friction.

In which case, we'd have to look at more than the book market. And at that point, we could look at it in one of two ways. We could look at it with consumption bundles and more micro. Or we could look at the aggregate GDP and a lot of macro.

Really what is assumed with this model is that the tax revenues go back to benefit those from whom they are collected.

[farrell2k]

This went from welfare moms working for slave wages to satisfy the stupid teabaggers to complicated math in only a few posts. I'm out.

[ishkabible]

jon: you seem be suggesting that the case of two firms and 1 product is meant to reflect a more complex economy than the model was meant to. it seems undeniable that if you only had 2 firms and 1 product in an economy that taxes create deadweight loss. when you account for the gains of taxes things even out, even in a simple model I would suspect(well, given reasonable taxation). After you look at an impossible to model beast like our own economy I would suspect it would even out more.

edit: mac beat me to it, I suppose if it's taking me 10 minutes to create an half intelligent response I'm getting tired or lack the education to talk about this.

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complicated math in only a few posts

the math itself isn't very hard, it's just basic algebra. it's the interpretation and nomenclature that makes it remotely difficult.

This post has been edited by ishkabible: 07 January 2013 - 10:47 PM