Apparently you conflate being warned about snarky, disrespectful comments as the same as being banned for posting anything substantive. Why?
I apologize for my disrespectful comments. But I think my main point is a fair one. And I don’t appreciate being called an amateur. That’s rude, inaccurate, and unnecessary. It encourages bickering, etc. Better is to keep to the topic at hand and show me concretely where I made my error. I see absolutely no error.
so for you its a market failure when one business thats the best at delivering pizza’s has to charge high prices to do this, and others wont compete away their business because they are not capable of creating pizza’s at lower cost, or better pizza’s for the same cost enough to make a dent of any-size-at-all in the PizzaKing’s enterprise.???
so you are against someone being an awesome, almost impossibly terrific producer of pizza’s?
also, implicit is that you feel qualified to look at an industry, count the number of atomic producers and pronounce that you know how competative the industry is, and that the prices are ‘too high’ . too high compared to what?
You misunderstood my argument almost completely. You are describing a pizza enterprise that charges high rates because the market is willing to reward them, and they succeed based on their own virtues. But what I was describing was a market where only one firm is present, the service is inelastically demanded, and due to extreme fixed costs no other firms are able to enter the market, even though the demand aspect of the market (the invisible hand) is begging them to enter and undercut the current supplier. These two instances are completely different.
Maybe a better example would be clearer. So let me think of one that might be clearer. Give me a minute.
And as a side note:
Too high because it exceeds the real value. If you wanted to drive your car and the price at the pump had been inflated by 10,000% from the day before, you know there is a failure happening because that kind of demand increase or supply decrease has not occurred. Not on that scale. Not large enough to explain the price difference.
you are describing failure in a non-technical way. if your marriage partner lives with you, and brings in the bacon, and you spend your day ironing, cooking, and reading about economics, and having sex with them in the evenings; Your marriage partner is getting the benefit of your various services at some price less than their income. however, if you demand a divorce, suddenly the price at which they receive those services becomes infinite. clearly a market failure. focred marriage is the way to go.
Propoganda by the Ministry of Marriage.
Let’s talk about a speculative bubble. Specifically … tulips. (Incidentally this is what happened to our housing market until recently).
Demand can inflate beyond what the actual value is for a good or service. Inflating the price above what the economy actually values it as. I know on paper, with a very simple model, that seems impossible. Price = Point where Demand curve intersects with the Supply curve. However, looking through a wider lense we can realize a few things.
For example: A person may demand a service or good with the intention to sell it, not becaus ehe actually demanded it for any intrinsic reasons, but because he expected the demand for the product to increase indefinitely, or the supply to decrease indefinitely. As the product changes hands the cost of it is greatly amplified by this speculation and a speculative bubble occurs. This happens in the freest of all possible markets. And is another case where the invisble hand is unable to correct a problem as fast as a controlled market might.
So let’s look at history. In the 17th century in the Netherlands, tulips became an item that people universally expected the demand (and subsequently the price) to continue to rise. At the height of the speculative bubble the value of a tulip was several times more than a mastercraftman earned in one year, and in some cases tulips were trades for whole estates.
The simplest explanation, that the price accurately reflected the value of the tulip, is false. Demonstrated both my common sense and also the subsequent immeidate pop of the bubble and collapse in the value of the product. Dropping in value by a factor of over a thousand.
no, you are misunderstanding your own position almost completely.
you say there is only one firm present. You beg the question WHY . If its fixed costs; then the in-the-market firm, has proven its superiority over other firms which lacked the capital to enter the field. its superiority was in a) having the capital; b) being in the field. Any such firms profit success is a signal to those that have capital, that it might be worth pooling enough cpaital to compete, and capture away the market share; and this fact does LIMIT the price that the first-to-market firm can charge; as the higher it cahrges, and the more profit it reaps, the more other firms seek to enter the field, and risk their capital in it.
tulips have no intrinsic value.
What does any of this have to do with Austrian economics?
I reiterate my invitation to learn more about the science before you come here demanding that we educate you. That’s what most people who join the forums knowing nothing do. We’re willing to help those people.
you think that there is a class of people would be market controllers that are superiour calculators of consumer demand, and resource constraints than a class of people called entrepeneurs. evidence? but then again, by dropping in the word might, you may have given the game away.
I’m using the textbook definition of market failure. I’m really not sure what your example is trying to say. So I’m going to break it apart and maybe you can help me see how it is at all relevant.
“you are describing failure in a non-technical way.”
I’m describing it in the most technical way available. I didn’t invent the term. But for clarity a failing market is one that doesn’t satisfy both the demand and supply curves accurately. Either over producing, under producing, most generally because the price (which is where the graph of supply intersects with the graph of demand) is higher or lower than what is optimal. That’s a failing market in a technical sense.
“if your marriage partner lives with you, and brings in the bacon, and you spend your day ironing, cooking, and reading about economics, and having sex with them in the evenings;”
Ok so we have a mutual trade off. In your example I am trading household services and sex for financial support. You have given an example of a single supplier and a single demand point. Which, by all rights, isn’t really a market. Since the market for mates, for example, would include other people I could trade these services with.
“Your marriage partner is getting the benefit of your various services at some price less than their income.”
I don’t see how. This is the point you have to explain in great detail. Because it doesn’t make sense to me. Both partie sin this example are rational decision makers, there is no reason to suppose that one is getting less out of it than the other. In fact, there are several reasons to assume the opposite. That both are getting as much out of it as they are putitng into it, maybe even more. When a trad eis made it’s usually in the benefit of both parties, otherwise the trade doesn’t go down. (except for in cases of elasticity problems)
“however, if you demand a divorce, suddenly the price at which they receive those services becomes infinite. clearly a market failure. focred marriage is the way to go.”
I would say this is a non-sequitir, but I can’t even make sense of it long enough to see the point you’re trying to make. If I am a firm offering a product, say cheese, and I exit the market, the price for my cheese is not infinite. It’s simply a product that is no longer available. There is a huge difference between “infinity” and “not present.”
And the primary flaw of government is the far more failures that occur than they would if left to the market, and the absolute inability to correct these failures using said system.
Not correct, peopel admire them for their aesthetic beauty. But you’re distracting us from the main point. Which was that their market value became ridiculously greater than their actual value.
you have no value theory.
Nirgraham
You said I misunderstand my own position. Forgive the candor but that’s a really stupid thing to say. Whether or not I am correct is fine for you to debate, but I’m not arguing with myself. Don’t be ridiculous.
You seem unable to accept the theoretical idea that only one firm could exist in a market. Since you apparently don’t understand barrier to entry, i will give you an example from history. Standard Oil (19th century) controlled by John D Rockefeller who was the richest person in history.
barriers to entry include the enormous amount of capital you’d have to purchase to start up, not to mention access and ownership of limited resources, most especially oil. Because of these barriers no one could compete with him, even though they wanted to, even though the market was wide open. The barriers to entry were too enormous to allow for the market to correct itself. That’s rock solid.
Um. Are you seriously arguing that something that pleases someone doesn’t have intrinsic value?
Spide,
I said almost that exact same thing in my original post. I’m not here to say that the austrian approach is wrong, I’m here to say that all points of view have value and are all attempting to model reality, but that isn’t completely achievable yet. I’m not advocating a certain school or a certain method, rather attention should be paid to them all. What I’m getting though, from here, is that there are many austrian hardcore fanboys who would rather argue for the sake of arguing instead of trying to further their education by studying all views.
If you’ve studied economics as extensively as you purport, how can you fail to notice that economists reject the notion of “intrinsic” value as far as their science goes? Aesthetic valuation of a tulip would be one of the prime examples they’d marshal.
well, there is no evidence that would permit you to determine the correct quantity that should produced, you dont know the demand schedules of the agents in the economy. These are all fictions. So you have nothing to contrast your ‘monopoly’ with..
this is fine so long as your ex, doesnt care who she gets the services from, if the provider is no great shakes, if there is no product differentiation then what you say is the truer. however the more that your ex discriminated between the people that provide the services, the more she notices that hitler and cassanova have different bedroom styles, the more any given provider of services, becomes a provide of ‘mopoloy services’ , a monopoly on ‘sex with X’ or a monopoly on ‘food cooked by Y’ etc.
i think you flat out confused about my statement. assuming the only source of income is your partners income, and it is sufficient to pay for you providing the aforemention services to them; then the cost of the services is less-than-or-equal to the income. in the monetary units. i.e they earn 1000£ a month. you sex and cook → sex and cook costs less than 1000£ a month. (this assumes away the ability to debt finance an other such matters)
if you cant buy a good for-any-price. the cost to purchase is infinite in extent. if you can’t climb to the top of a tree no matter how high you go. the tree is of infinite height.