LOL! Interesting to see Trader_Jorge becomes more and more famous in the D&D ... maybe he's thinking about taking over YoYao's position as the most well-known poster on the BBS... I'm not too sure about his intelligence & knowledge in economics or politics... but surely he knows how to play the psychological game with you guys...
Mr. Clutch - people AREN'T debating the efficiency of free markets (at least nobody versed in economics since 1930)!! It's a fact that free markets will not always allocate goods efficiently. In pure private goods markets, sure the free market will allocate efficiently, but there are numerous markets that do not fit these constraints. What causes market failure in impure markets is the same thing that ensures efficiency in pure private goods markets, namely that people are rational utility maximizers. In a public goods market, the fact that I'm maximizing my utility (subject to my budget constraints) and you're maximizing your utility leads to an outcome that is Pareto efficient (i.e. no trade can be made that makes one person better off without making another person worse off) however it does not maximize aggregate utility. That may be a little jargon-y. Let me try and give a (admittedly simplistic) example: 10 people live in a subdivision. We're all thinking about building a park. To simplify things, let's say land is free, and it costs $1 to build a sq. foot of park space. Parks make people happy, and every person derives one unit of utility from each square foot. Furthermore, beer makes people happy too, and they can buy beer from the grocery store for $5 per bottle (it's imported). Each bottle gives people 10 units of happiness. Let's say each person has $100 of disposable income. If I'm maximizing my utility (I'm a rational being, after all), then I'd blow all my money on beer. I get 20 bottles and 20x10=200 units of utility. Woo hoo! Everybody is doing this, so the total utility in the subdivision is 10x200=2000. HOWEVER, if everybody spent their money on park space, then there would be 10x100=1000 sq. feet of park space. Each person would get 1000 units of utility. So the total utility in the subdivision would be 10x1000=10,000!!! The fact that the park is a public good leads to this market failure! If the deed committee stepped in and forced people to buy the park, everybody would be unequivovably better off. However, that's not a free market (Since consumers aren't allowed to pick the quantity of goods to buy). In this case, market failure is underallocation of the public good. Each person says, "Why the hell should I invest in park space? Who cares if everybody enjoys it, I only care about my own utility, and I get more bang for my buck with beer." This isn't a selfish thing or anything, it's intelligent, rational, utilty maximizing behavior. Now EVERYBODY says this, so the park is underallocated, and although everybody rationally maximized their own utility, they could have all been better off. That's an example of where a free market fails. Trader_Jorge - I don't quite understand what any of the stuff you write has to do with the topic. Sure these are principles, and they assume the ideal. If we relax some of the assumptions and allow for non-ideal things, then inefficiency will only go down. EVEN IN THE BEST CASE, market failure WILL exist in free markets. Throw in all the variables you want, they'll only muddle up the analysis and draw the results away from being efficient. The idea of modeling is NOT to include all of the variables at hand. Why, then the model is just reality, and the model serves no purpose (you might as well analyze reality). The idea of a model is to simplify the real world in a way that you can make meaningful statements through simple intuitive analysis. In short: the real world is too damn complicated, that's why we have models. Glynch - no, not a PhD yet, but I'll get there Right now I'm working for a year in DC as an economist at a think tank. I'm not sure about the headline you posted, I'll take a look and reply back at some point (if this work ever gets done!)
Trader_Jorge - I don't quite understand what any of the stuff you write has to do with the topic. Welcome to the world of Trader Jorge. Nonsequitors and distorting statistics are his two specialities. You're new here -- you'll learn soon enough.
You seem to repeat this mantra over and over. Perhaps it makes you feel a little better about yourself. I successfully refuted your incorrect accusation yesterday regarding the jobless claims figure. You offered no rebuttal. Repeating something over and over does not make it true. You'd better try something else to attempt to 'win' an argument.
Hey, let's give Jorge a break. In this thread he has actually had some more substantive replies. Thanks, Jorge.
Meanwhile bak in the real non-idealized world of market models. We have a glimpse why te troops get shafted. Free enterprise of the worst type. The type where you get government contracts from newly privatized "businesses" cause you have political onnections. ************* Why Does the Bush Administration Hate Our Troops? by Nathan Newman Why are our troops suffering in such filth and discomfort over in Iraq? That's been an odd puzzle, since where killing of troops by guerillas may be somewhat beyond the control of the military, you would think that delivering decent facilities for daily living wouldn't be such a challenge for this high-tech army. The problem is that it's not the high-tech army taking care of those living conditions, but private industry on contract. For over a decade, the military has been shifting its supply and support personnel into combat jobs and hiring defense contractors to do the rest. And the process has accelerated under Defense Secretary Rumsfeld. And despite the alleged wonders of private enterprise, those companies have left soldiers in filth, heat, and garbage. Why Private Contractors Fail Soldiers: While soldiers can be ordered into combat zones, civilians cannot. So U.S. troops in Iraq have had to suffer through months of unnecessarily poor living conditions because contractors hired by the Army for logistics support plain failed to show up. Even mail delivery – turned over to management by civilian contractors -- fell weeks behind. "We thought we could depend on industry to perform these kinds of functions," Lt. Gen. Charles S. Mahan, the Army's logistics chief, said in one interview. Woops. Soldiers have progressed from living in mud, then the summer heat and dust. One group of mothers organized a drive to buy and ship air conditioners to their sons. An Army captain ended up turning to a reporter to have him send a box of nails and screws to repair his living quarters and latrines. For almost a decade, the military has been shifting support jobs over to the private sector. And the result in Iraq has been a disaster for the troops. Not surprisingly, when the going gets tough, the civilian business folks take a hike. url
