I would like to share with you all an article that I found here:
The title is interesting and I would really like to read various opinions on the subject.
Here is a sneak peek :
“The Law of Supply and Demand is an empty, tautological doctrine that is not supported by observations of the marketplace and merely serves as an excuse used by some producers to increase prices to the detriment of consumers. It is not an economic law; it is an economic flaw. It is not even a legitimate idea; it is a mere notion.”
““equilibrium price” which is a purely theoretical concept. What relation it has to the actual price is a mystery.”
Equilibrium price is the price that the actual price tends to go to, absent of shocks. Think of it as a dog chasing a bone, but the bone keeps jumping from place to place.
"When an oil company or an economist claims that the price of gasoline is rising because of increased demand, it/he/she is weaseling. "
What? That is not true. Actual price tends toward the equilibrium price.
“All equilibrium price means is the price at which the number of units for sale is equal to the number of units consumers buy.”
Good way of putting it.
“But equilibrium is a fantasy. If it is ever attained in reality, the attainment is purely accidental. So the Law of Supply and Demand plays no place in the marketplace.”
Globalresearch.ca is a joke. It’s filled with all sorts of kookery. It’s the bad kind of conspiracy theory site that relies on conjecture and not on facts.
The only thing they are occasionally useful for is foreign policy and geopolitics information.
The entire article can be refuted by the pricing changes shown in consumer electronic goods. We continue to get better quality at increasingly lower prices, in a massively growing market segment.
Nope, it’s a pretty sound law as far as I am concerned. Insofar as one acts, it applies to their actions, and especially economic transactions. A tautology is saying “A is A” (which is trivial, except as a statement of the law of identity, from which the law of noncontradiction is derived.) The law of demand is built off the theory of marginal utility. What is an economic “law” in this person’s world? How do mere “observations” determine whether something is an economic transaction (as opposed to, say, a game) and how does it excuse prices that are to the “detriment” (in terms of what?) to consumers? This is rubbish. As something becomes scarcer, it becomes more valuable. This is understandable by mere intellectual apprehension of reality and action. The author is damn right it’s theoretical. That’s all the more of a case for dismissing hogwash like his/hers.
Haha, the funny thing is the guy has an another article on his site which includes the following sentence:
"The result, of course, is more money chasing a relatively staticsupply, and that increase in demand was bound to push stock priceshigher than their valuations would be under traditional terms. "
Was this before he decided supply and demand don’t work and prices are decided by throwing darts at a board?
did anyone else notice that they used the word tautology to describe it? so they’re admitting that to contradict supply and demand would be a logical fallacy. the other meaning of tautology would imply that supply and demand are the same thing. basically true, they’re two sides of the same coin.
never bother talking to people who use words they don’t understand the definition of.
"Pricing is not the only method of distributing products. In times of crisis, such as wartime, products are often merely rationed. Everyone who needs a product gets a share of those available. The manufacturer makes a profit and consumers get at least some of what they need. Another distribution method is the method described in the previous paragraph. Products are distributed to consumers first come. Again the manufacturers make a profit and those consumers who get to the retailer soon enough get what they want, those who do not get none. But what would happen if the Law of Supply and Demand were applied in the market place? The vendor would raise the price as the supply diminished, the consumers who managed to acquire the product would pay more for it than they would otherwise, and the other consumers would get none no matter how essential getting some was. This scenario is identical to the previous one except that the vendor makes a larger profit at the expense of the consumer. It is merely a method of transferring wealth from consumers to vendors without providing consumers with an additional benefit. In other words, it transfers wealth from the neediest to the neediless. "
And what would happen on the supply side when profits are rising, professor?
Is it so hard to understand that people are chasing profit according to the risk involved? Given that price is rising and all other things equal (risk), money would of course start to flow in production of that product. And it would flow in as long as the profit is above normal levels achieved by other industries. Even more, prices of inputs (labor, materials) would be potentially bid up until that extra profit margin disappears. Due to that fact, profits in general are pretty fixed compared to GDP.
In recent years this trend has been broken (I wonder why). I bet it will revert to mean. The long term average should be around 6%.