Economic Theories

[Primula Baggins]

Yes, please!

[Jnyusa]

Now I can't think of anything to say!

Superwizard, that is way cool sitting next to Kenneth Arrow ... but you know what? I wouldn't recognize him either if he sat down next to me. Don't think so anyway.

The Monetarists you studied in macro? - that's Friedman's theory.

My daughter (D#2) called me on the phone last night to discuss Karl Marx. She's taking a course right now in social theory, and they're having to read parts of Capital. Marx is not an easy read ... mainly, I think, because the theoretical foundation he is building on is so out of date. Andyway, she needed help understanding what she was reading and it was very pleasant to feel so useful.

Generally, nearly all the law classes D#2 is taking have started out with some economic theory. I was pretty amazed, because her very first class last year started with the very same thing I start my grad students with in Environmental Policy ... Coasian bargains ... don't want to get technical here but Voronwë and nel and our other attorneys are probably famliar with the concept. It was surprising for me to see how much of the law really rests on free market theory. I don't know if that's a good thing or a bad thing, because free markets are really an esoteric concept. In industrial societies very few of our markets conform in practice to the requirements of a free market. (This has nothing to do with government interference, by the way, but with the intensity of competition and how that affects people's sensitivity to price changes.) But our social contract - whereby the prima facie of income distribution is productivity - that's all about distributive justice, and I guess that is what our legal framework is mostly concerned with too.

Jn

[superwizard]

The Monetarists you studied in macro? - that's Friedman's theory.

Ohh got it! Well the theory seems ok but whenever someone in my class even mentioned Friedman last year you could feel my teacher getting mad. (he blamed him for what happened to certain countries after they implemented his theory)

[Inanna]

Thanks Jn! I hope am able to carry it through....

Ollie Williamson is a delight to read, and as far as I'm concerned, his book is still current.

Definitely. And that is true for all ground-breaking, founding theories. One always has to go *back* to what the great captain really said. Nothing like reading Theory of Relativity is there?

I do not know much about Friedman's impact on countries, but the little I know about Chile... am not so convinced it was really his doing. If he is talking about freeing markets from political inteferences, a dictatorship is hardly the recommended solution!! (Am not so understanding about his relations with South Africa during Apartheid.)

Though I do believe in the theory of free-markets, I defer from some of the economists that I have met about its implementation. While India has definitely benefitted from opening up its economy - IMHO, the benefit has come because the government and the central bank have gone through it in a step-by-step structured way. Just opening up all the sectors in one big bang, would have done us more harm than good. At the same time, I feel the continued protection of the Steel industry in the US is probably harming the nation as a whole - and not just in simple monetary numbers of how much it costs US - but also in terms of negative downstream effects into other businesses.

[Lurker]

All I know are the two laws of economics:

1. For every Economist there is an equal and opposite Economist.
2. They are both wrong.

True! True!
I think I said in another thread that economics is all about theories. (I think it's the one in response to Vison's post about the housing market in the US.) So you can say that what Frelga posted is almost the truth. I have an MBA in Economics but I haven't used it, you know, job related. I should have majored in Finance instead. Stupid!!! I took Economics out of spite. I wanted to get back at my HS teacher, it's a long story but the look on his face when I got my degree was priceless.

I would love to "audit" Jnyusa's economics classes.

I'm tired tonight but I would love to join this discussion.

[Jnyusa]

I would love to "audit" Jnyusa's economics classes.

Thank you! I'd love to have you there!

My classes are fun. We do have fun. But we learn hard stuff too.

Jn

[Lurker]

Jeffrey Sachs is a Harvard economist, famous for his development of supply-side free market economics. He designed the phasing out of Soviet subsidies to agriculture and manufacturing, arguing that the rising prices would attract new investment and the market would clear at much higher levels of output. He scheduled the food deregulation for January 1 .... um 1995 iirc, might have been earlier than that. Right. Every Russian farmer is going to rush out to the field and start planting grain on January 1 in response to higher prices. That year was probably the worst time the Soviets have seen since Stalin, seriously. Food was priced beyond the income of practically everyone, and no way to increase the supply for exogenous reasons (climate) which Jeffrey Sachs had conveniently assumed away. I use him as the prime example of moronic economists in my classes, and every time his name comes up there is a Russian or Polish or East German student who has a tale of woe to tell about the hardship and starvation that afflicted their family when their government followed Jeffrey Sachs' advice about transitioning to a free market.

Where Jeffrey Sachs is concerned, I'm afraid I have no respect for him at all, Nobel Prize notwithstanding. Crikey! - he lives in Massachusetts. It's not like he never saw snow. But he looks at it without seeing it, if you know what I mean, and that is the emblem of a moron. When lives are at stake, it is the emblem of a criminal.

Jn

I agree with Jny on this. I’m a huge supporter of agricultural subsidies. Agriculture is very unpredictable in the first place, it’s not like manufacturing wherein you can increase your production and sell your surplus somewhere else. I did a thesis before with regards to small farming communities that it is better for the economic stability of small towns, plus how to plant multiple crops side by side (got from my wife) etc.. which I posted in TORC I think 5 years ago. I’ll try to retrieve the thread so I can post the discussion here.

I found this article with regards to Jeffrey Sachs and foreign aid.
http://abcnews.go.com/2020/story?id=1955...

[axordil]

I'm a big supporter of agricultural subsidy so long as those products stay in the local or national market or are only sold to other countries with subsidies. When it becomes a export tool to destroy the agricultural economy of develping countries that can't afford to have subsidies, I start having problems with it.

[Griffon64]

I'm a big supporter of agricultural subsidy so long as those products stay in the local or national market or are only sold to other countries with subsidies. When it becomes a export tool to destroy the agricultural economy of develping countries that can't afford to have subsidies, I start having problems with it.

Ax - Thank you!

As someone who grew up on the African continent - much of the poverty and pain of that continent is created by agricultural subsidies. Africa's farmers cannot compete with the sleek, subsidized agriculture of many first world countries, and it strangles their economies. The first world "dump" their excesses, created in part by these subsidies, on these countries, the imported product becomes cheaper than what local farmers produce ... it is a sorry tale.

Well, so what? The citizens are fed, right?

No, not always. The citizens can't afford to buy that food, always, because they come from those failed local farms, perhaps.

It is a painful chain, and one of the very things that kills Africa - its reliance on aid, its inability to lift itself - gets fed by such policies.

What to be done? Do you rob Peter to pay Paul? Do you even care?

On the other hand, even these products staying within their originating countries already harms poor countries. For who is going to buy their produce? Won't there be an outcry if the subsidized farmers doesn't get to sell first? How will the poor countries beat their prices?

The kind of economic models and reasoning that I'm interested in is those that are going to fix the world economy for the generations that come after me. Those that will be fair enough to make sure that everybody willing to put in a honest day's work, will get a honest day's wage at the end of it, and be able to live with dignity.

( I realize that economies alone cannot fix the world. But it can start. Broadly speaking, social-economical problems lessen as prosperity increase and breaks above the poverty line )

[vison]

I think people should eat food grown in their own place. Agricultural subsidies can be useful to support small farmers, maintaining reasonable price levels, protecting markets, etc., but they are, in fact, used in North America to fill the pockets of huge agri-businesses. Billions and billions of dollars wind up in the pockets of Monsanto and Cargill while family farms die. I can hardly write about it without shrieking in fury.

I also think that for poor African nations to HAVE to export food to satisfy some international monetary group is wicked: FIRST you grow enough food to feed yourselves, THEN you export the excess. That's how it should be done. The way it is done has put the cart before the horse.

[Griffon64]

I wasn't saying they should HAVE to export, of course

I was referring to the fact that quite a few African economies have nothing much to export except their produce, and when you take that ability away from them ... It should go without saying that they should only export excesses, if you are referring to the wellfare of those countries, like I was trying to do. I couldn't care less about international monetary groups' interests precisely because it is their interest and not the interest of the people.

Filling the pockets of agri-businesses is plenty

I think people should eat food grown in their own place.

But ... butbut ... can North America grow cocoa beans? Pomegrates? COFFEE???



Should Colombians live from coffee alone?

If it is grown in your region, you would do well to support local economy first, provided prices are reasonable and everybody gets a fair cut of the pie. The exotics you want you can obtain from elsewhere, out of their excesses.

Or something like that, at least

[axordil]

I try to stick to locally obtained food, but it's hard to do without making major lifestyle changes in a lot of places. There are, for example, produce co-ops in the area that would supply us with rather more vegetables and fruit than we could humanly use in some seasons, and diddly in the winter. Once upon a time, people did home canning for this reason, but that just isn't an option for a household where both parents work.

If I KNOW something (fruit, for example) was flown from Chile or New Zealand overnight, the mind-boggling amount of fuel burned is going to keep me from buying it. If it came via ship (wine, for example), it's not as bad, if not ideal.

[Voronwë the Faithful]

What to be done? Do you rob Peter to pay Paul? Do you even care?

I care, Grif. I just don't know what is to be done.

[vison]

Of course we are going to have to import certain foodstuffs. But what I meant was to eat as much as possible from locally grown foods.

We grow our own meat: beef and lamb, sometimes pork. I buy chickens and eggs from a neighbour who raises them organically. I buy local fruit and vegetables in season, and grow a certain amount myself.

Most people can do more of this than they think, by making simple alterations in their shopping practices. Demand local produce at the supermarket, demand hormone and drug-free meat. No need to start driving around the country to farms or even farm markets. The big stores want your business and will go quite far to satisfy you.

Yesterday I saw a woman buying 3 FLATS of California strawberries and she was bragging on how she was going to make jam. Well, we grow strawberries here, too, the finest in the world, but the season ended in June. So I asked her why she was buying strawberries now, from California. Those plastic ones, that are white inside and have a vague, faint, hardly detectable taste and fragrance of the Strawberry. I said, jeez, I buy the local ones and freeze them until I'm ready to make the jam. She said she was buying these ones because they are cheaper. So there you are. When people want to be fools, you can't stop them.

[Griffon64]

vison - im my perfect life I would be sort of where you are, with the ability to raise my own meat and grow some of my own food. Unfortunately, I'm stuck living in a city. Painful when you grew up eating veg and fruit fresh from the land!

That strawberry woman is just . I mean heck, I live in California and I don't even buy the strawberries, precisely because they're plastic

Ax - you make an excellent point about the fruit flown in.

I try to buy drug-free meat and such where I can ( or at least, tried to in South Africa! Cost of living is higher here! ) and I am hoping that recent food quality scares like Mad Cow will at least help to make our food production methods better. Vast amounts remain to be done to "educate the public", though.

V - I don't know what can be done, either.

[baby tuckoo]

What to be done? Do you rob Peter to pay Paul? Do you even care?

*Doesn't care. Has warm bottle at the moment*

[Griffon64]

What to be done? Do you rob Peter to pay Paul? Do you even care?

*Doesn't care. Has warm bottle at the moment*

Concise commentary.

[Lurker]

As someone who grew up on the African continent - much of the poverty and pain of that continent is created by agricultural subsidies. Africa's farmers cannot compete with the sleek, subsidized agriculture of many first world countries, and it strangles their economies. The first world "dump" their excesses, created in part by these subsidies, on these countries, the imported product becomes cheaper than what local farmers produce ... it is a sorry tale.

African farmers can compete in the world market, you know, the problem is, aside from foriegn aid going into the hands of politicians, is that huge chunks of land in Africa is owned by a few influential and rich people. What's happening is like in most third world countries (the subject of my thesis was Asia (sugar and rice)) the farmer has to increase the price of their produce because they just "rent" the land they till, a percentage of what they sell in the marketplace goes to the landowner. The landowner doesn't care if there was a draught this year, locust infestation etc... you pay up or you lose your livelihood. Aside from subsidies, I'm a huge supporter of "agrarian reform" or land for the landless farmers.

Another problem that threatens farming in the third world is the increase in industries. I had the exprience of actually working in a farm as part of a Catholic youth group (stepping into the shoes of the less fortunate) and I tell you farming is definitely hardwork. The farmer's son/daughter would rather work in a cramped factory putting glue on shoes with an hourly wage than wake up before dawn and go home at sunset, keeping their fingers crossed that hopefully the forces of nature will smile on them this year. A lot of farmers in the third world have given up farming for manufacturing. If only third world countries esp in Asia and Latin America can subsidize their farmers they would be able to feed the rest of the country without importing. Will you die if you can't eat an apple, a banana will suffice your hunger, right? In some countries they do need to import stuff like wheat since they can't produce it due to the climate so you can't put off exporting as well.

People wouldn't go hungry if only we can ration out food, right? It can eliminate obesity here in North America, too, since you will be supplied a balance nutrition, whatever you do with it is up to you.

[Jnyusa]

Sorry for ignoring this thread just when it was getting really interesting!

I'm with Lurker 100% on this one. The source of the problem is the pattern of property ownership. Often it is not merely a few elites who own most of the productive assets in the country, but those elites are foreigners. They produce export crops and the profits never come back to the country where the crops were grown, they go to whatever country the owner lives in. It is very misleading to question why these countries can't earn enough in the export markets to buy food - (the free market assertion) - unless you take land ownership into account.

And yes, the only serious solution is land reform. But countries who attempt to enact land reform run into a lot of political and technical problems, not least of which is the fact that the world banking community punishes them by refusing them foreign credit.

Jn

[axordil]

A lot of farmers in the third world have given up farming for manufacturing.

This pattern isn't exactly new or unique to developing countries, either. The difference between what's happening in Africa and what happened in, say, North American between 1860 and 1960 is instructive, though. People left farms here because there were more opportunities in the city AND because farms were getting better at producing with fewer hands. I don't think that's the case in Africa.