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  1. #1
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    Can a capatilist economy ever reach equilibrium?

    Just curious. Seems that it demands ever expanding markets in order to work and then there's that vicious circle thing where wages are always trying to catch up to the ever increasing price of goods and services.

    What's the end game? Is there one or is this the one fundamental flaw in market economies? I don't know much about economics but was wondering if the Adam Smiths or Keynes or Friedman's of the world ever described what they they thought the future of capitalism would be. It works pretty well over time as it progresses but what happens when the markets are saturated and there's no more expansion? Or when the expansion undermines society itself by consuming the resources it depends on.

    I recently heard a short lecture from Jared Diamond and it's got me wondering. In case you didn't know Diamond is the best selling geographer who wrote Guns, Germs & Steel, and Collapse which describes how civilizations in human history have grown. prospered and destroyed themselves.

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    A market can't really ever reach equilibrium, as it is made up of individuals whose desires are constantly changing, businesses whose inputs change, people die, businesses are closed, etc, etc

    As far as the consumerist/expansion based problem that you mention, this isn't necessarily part of a capitalist economy.

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    Quote Originally Posted by coreyb
    A market can't really ever reach equilibrium, as it is made up of individuals whose desires are constantly changing, businesses whose inputs change, people die, businesses are closed, etc, etc

    As far as the consumerist/expansion based problem that you mention, this isn't necessarily part of a capitalist economy.
    So it basically collapses and rebuilds? Eternal state of flux? This doesn't sound so hot.

    I guess it's true any economy can fall prey to these expansion based issues, e,g. using up resources, overpopulation, etc.... but doesn't anyone see a way for a free market economy to address these problems? I'm wondering if any famous economists had described the future of the world for us. I remember Milton Friedman had this "genius" theory where given the incentives and opportunity there would be enough minds to solve basically any problem we would face as a society. Technology will save us or something like that. That smacks of teleology and faith which I don't find very comforting.

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    False question

    Equilibrium is a theoretical concept that doesn't exist in the real world, for economies or any other observable phenomena. In practice, any perceived 'equilibrium' is simply a transitional state wrongly considered. Only change is permanent.

    Regarding markets, the best that can be accomplished is the attenuation of the far ends of the swings, and that's mostly about luck.

    And it's not at all a flaw in market economies - it's the nature of all economies. 'controlled' economies are worse - they have severe downs, but no real ups, at least as concern the market participants. Free markets tend to correct themselves - usually over-correcting a bit, but that is what it is.
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  5. #5
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    Quote Originally Posted by coreyb
    A market can't really ever reach equilibrium, as it is made up of individuals whose desires are constantly changing, businesses whose inputs change, people die, businesses are closed, etc, etc

    As far as the consumerist/expansion based problem that you mention, this isn't necessarily part of a capitalist economy.
    All true, except that economists typically consider "market equilibrium" to be reached when supplies and demands are met at a price point; I think we might be discussing "markets" and "economic systems" as the same, when they aren't, strictly speaking.
    There are plenty of examples of (short-run) market equilibria in the world, but they're usually for dull, boring goods, where prices have stabilized, along with supply and demand.

    I think if you're interested in the long-term future of capitalism, and you want to get beyond Marx, you might check out Galbraith for a start, and Lester Thurow, who wrote a book cleverly entitled "The Future of Capitalism." Past that, you're on your own; it's been awhile since I rode the econ range.

  6. #6
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    Quote Originally Posted by danl1
    Equilibrium is a theoretical concept that doesn't exist in the real world, for economies or any other observable phenomena. In practice, any perceived 'equilibrium' is simply a transitional state wrongly considered. Only change is permanent.

    Regarding markets, the best that can be accomplished is the attenuation of the far ends of the swings, and that's mostly about luck.

    And it's not at all a flaw in market economies - it's the nature of all economies. 'controlled' economies are worse - they have severe downs, but no real ups, at least as concern the market participants. Free markets tend to correct themselves - usually over-correcting a bit, but that is what it is.
    So prices and wages just go higher and higher? What's the reset point? I'm hoping it's not collapse. Wouldn't it be better if it wasn't so provisional and ad hoc? I was thinking maybe someone has envisioned a sort of enlightenment that emerge from all these market games based on narrow self interest. Sort of like when biologists talk about "emergent" intelligence in the natural world. Ants are absolutely brainless and helpless individually but a colony of them works like a well adapted single organism. I'd of thought w/ all this game theory and nobel prize winning brainpower at work someone might have foreseen a day when the economy changes permanently.


    I know I'm headed to looneytune land but I'll see your false question and raise you a false dichotomy namely between a free market or a command one. How about no market at all? No money and individual motivations are changed once their primary goals are realized. In other words, say one fine day the market economy solves all the big problems and leaves people to indulge other more lofty goals. We've already made tremendous progress in the last 150 years compared to the previous 6,000 or so maybe there's something else at play here.

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    Collapse is inevitable in a consumption-based economy

    That's my theory, anyway: Based on the "Greed is good" mentality that drives our society, hardly anybody is ever satisfied, everybody wants MORE, the health of the system depends on continued growth in population and consumption, and one day we run out of stuff. There aren't enough resources on the planet to give everyone the same standard of living we have in the U.S., and world oil production is estimated to peak in as little as 15 years. My unborn grandchildren, and maybe even my kids, will have much different lives than I've had.
    Of course this is liberal tree-hugger BS, but it's still fact: The resources are finite.

  8. #8
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    Quote Originally Posted by Sintesi
    So prices and wages just go higher and higher? What's the reset point? I'm hoping it's not collapse. Wouldn't it be better if it wasn't so provisional and ad hoc? I was thinking maybe someone has envisioned a sort of enlightenment that emerge from all these market games based on narrow self interest. Sort of like when biologists talk about "emergent" intelligence in the natural world. Ants are absolutely brainless and helpless individually but a colony of them works like a well adapted single organism. I'd of thought w/ all this game theory and nobel prize winning brainpower at work someone might have foreseen a day when the economy changes permanently.


    I know I'm headed to looneytune land but I'll see your false question and raise you a false dichotomy namely between a free market or a command one. How about no market at all? No money and individual motivations are changed once their primary goals are realized. In other words, say one fine day the market economy solves all the big problems and leaves people to indulge other more lofty goals. We've already made tremendous progress in the last 150 years compared to the previous 6,000 or so maybe there's something else at play here.
    You need to quit drinking and posting at the same time.

    Differentiate the "market" from the "economy" as someone else said. Two different things.

    The market responds to demands. I don't believe that, by definition, there could be a command market. Markets are places where demand for something creates a product to fill that demand. You couldn't command a market to demand something, As to command economies, those never worked out very well.

    Free markets have a way of regulating themselves, which is in answer to your intial question. This mortgage mess, for example. Part of the problem with write-downs and near failures, ala Bear Stearns, was lack of liquidity due to uncertainty of risk and arbitrary pricing. As some of the dust has settled, there are some mighty big players backing up their bond trucks to buy a lot of that stuff at unbelievable discounts. Soon there will be all kinds of liquidity, the loans will be sold, held, re-sold for fabulous profits to investors willing to take the risk, and, in general, continue making principal and interest payments until they are paid off.

    Yes, prices and wages just go higher. No reset point beyond financial collapse. They are entirely provisional (sellers will charge as much as they can before people stop buying their product; workers will demand as high a wage as they can before they run themselves out of a job when the employer no longer needs that labor at that price) but not ad hoc. It really is, in spite of the huge amount of government interference, a pretty efficient system.

    And its all based on greed and narrow self-interest. Capitalism isn't fair at all, and Adam Smith said as much. Never intimated that it was. Except that, theoretically, it gives everyone an opportunity to become wealthy. The pie expands constantly. There is no end-point, no equlibrium that you seek. As long as people are greedy, it will go on and on and on. Greed appears to be one of the fundamental emotions us humans carry around, so I have high hopes that capitalism, in spite of Marx, Hegel, et al, will be around for our lifetimes at least.

    If we could ever solve that greed problem, maybe it would die off. Until then, free markets rule.

    Go back to your drinking, but don't post until you're sober.
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    Quote Originally Posted by Cory
    That's my theory, anyway: Based on the "Greed is good" mentality that drives our society, hardly anybody is ever satisfied, everybody wants MORE, the health of the system depends on continued growth in population and consumption, and one day we run out of stuff. There aren't enough resources on the planet to give everyone the same standard of living we have in the U.S., and world oil production is estimated to peak in as little as 15 years. My unborn grandchildren, and maybe even my kids, will have much different lives than I've had.
    Of course this is liberal tree-hugger BS, but it's still fact: The resources are finite.
    But the demands are not, and as long as greed is around, someone will come up with a way to satisfy the demand. Likely as not in ways we never imagined possible.

    Shouldn't you be in bed getting ready for your radio show?
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  10. #10
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    “The development of Modern Industry, therefore, cuts from under its feet the very foundation on which the bourgeoisie produces and appropriates products. What the bourgeoisie therefore produces, above all, are its own grave-diggers. Its fall and the victory of the proletariat are equally inevitable. ”
    — (The Communist Manifesto)

  11. #11
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    Quote Originally Posted by moneyman
    You couldn't command a market to demand something,
    Unfortunately this is not true. Lobbyists for big business have infiltrated the legislatures in every state and purchase of certain goods and services are in fact commanded. Insurance being a prime example.

    The city council in Austin is proposing and ordinance to require EVERY new home to be ADA compliant when built even if somebody that is handicapped never lives there. I can guarantee you that there is no demand for that.

    Manufacturers of energy efficient and safety products seem to run rampant in this area of the market. Who do you think lobbies and benefits from bicycle helmet ordinances?

  12. #12
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    Speaking of goofy mandated demands, I predict our next big bubble will be "green" stuff. Fed by regulation and mass hysteria, you can already see the roots of it sprouting.

    Seen the blips about bike sales? Hybrids? Check solar panel prices lately?

    Re: the OP, one of the big lessons of history is that human nature is not changing. You can call it greed, I prefer to see it as the modern manifestation of status for dominance / mate selection. Either way, it's pretty deeply hardwired in all of us that we want to be cooler than the next person. Competition for mates etc.

    +1 equilibrium is a myth. And besides, think about it a while - what would that be like in practice? No new products? No innovations? No net new population? (talk about command economies... Logan's run?). You wouldn't be able to build a swimming pool for your 1 child? Not even a hot tub and a deck?
    * posted by Creakybot 2013 all rights reserved.
    * not actually waterproof.

  13. #13
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    Quote Originally Posted by android
    Unfortunately this is not true. Lobbyists for big business have infiltrated the legislatures in every state and purchase of certain goods and services are in fact commanded. Insurance being a prime example.

    The city council in Austin is proposing and ordinance to require EVERY new home to be ADA compliant when built even if somebody that is handicapped never lives there. I can guarantee you that there is no demand for that.

    Manufacturers of energy efficient and safety products seem to run rampant in this area of the market. Who do you think lobbies and benefits from bicycle helmet ordinances?
    That's true. Hadn't thought of it that way.
    A church that doesn't provoke any crisis,
    A Gospel that doesn't unsettle,
    A word of God that doesn't get under anyone's skin,
    A word of God that doesn't touch the real sin of society around it,
    What kind of Gospel is that?

    Oscar Romero

  14. #14
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    slippery slope folks

    Quote Originally Posted by Sintesi
    So prices and wages just go higher and higher? What's the reset point? I'm hoping it's not collapse. Wouldn't it be better if it wasn't so provisional and ad hoc? I was thinking maybe someone has envisioned a sort of enlightenment that emerge from all these market games based on narrow self interest. Sort of like when biologists talk about "emergent" intelligence in the natural world. Ants are absolutely brainless and helpless individually but a colony of them works like a well adapted single organism. I'd of thought w/ all this game theory and nobel prize winning brainpower at work someone might have foreseen a day when the economy changes permanently.


    I know I'm headed to looneytune land but I'll see your false question and raise you a false dichotomy namely between a free market or a command one. How about no market at all? No money and individual motivations are changed once their primary goals are realized. In other words, say one fine day the market economy solves all the big problems and leaves people to indulge other more lofty goals. We've already made tremendous progress in the last 150 years compared to the previous 6,000 or so maybe there's something else at play here.
    The Market as an organism will never reach a balance. The task is to try and get there and as we go along...TA DA another equilibrium is set. It is overall a cannabalistic process. However, as to a reset point, there are some models which after lots of folks with IQ's that exceed my body weight have used....there is no such thing as what you are asking. As another poster has mentioned, its a false question. The externalities are reakish and even those cant be predicted with any certainty. ALA:.......130 dollars for a barrel of oil. We sure did see that coming right?
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  15. #15
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    Quote Originally Posted by moneyman

    Go back to your drinking, but don't post until you're sober.
    What's that supposed to mean? You seem upset at me, something wrong guy?

    PS - I already said I don't know much about economics so sorry for not understanding terms. Jeez

  16. #16
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    Quote Originally Posted by Cory
    That's my theory, anyway: Based on the "Greed is good" mentality that drives our society, hardly anybody is ever satisfied, everybody wants MORE, the health of the system depends on continued growth in population and consumption, and one day we run out of stuff. There aren't enough resources on the planet to give everyone the same standard of living we have in the U.S., and world oil production is estimated to peak in as little as 15 years. My unborn grandchildren, and maybe even my kids, will have much different lives than I've had.
    Of course this is liberal tree-hugger BS, but it's still fact: The resources are finite.
    Sure seems that way doesn't it? Embracing greed works fine for the economy in the short term as MM explains but it's so plainly cynical and corrosive over time even he seems depressed by it. Greed isn't fundamental human nature btw, it's been tempered by many cultures and societies past and present; there's no "must" about it, no biological destiny per se just a tendency in my opinion.

  17. #17
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    Quote Originally Posted by CurbDestroyer
    “The development of Modern Industry, therefore, cuts from under its feet the very foundation on which the bourgeoisie produces and appropriates products. What the bourgeoisie therefore produces, above all, are its own grave-diggers. Its fall and the victory of the proletariat are equally inevitable. ”
    — (The Communist Manifesto)
    had the ol' Manifesto handy did ya? ; )

  18. #18
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    oh no

    Quote Originally Posted by CurbDestroyer
    “The development of Modern Industry, therefore, cuts from under its feet the very foundation on which the bourgeoisie produces and appropriates products. What the bourgeoisie therefore produces, above all, are its own grave-diggers. Its fall and the victory of the proletariat are equally inevitable. ”
    — (The Communist Manifesto)
    The logical conclusion of the Marxian idea was the Stufentgang which in a nutshell has aus all become this totyally care free species being.

    Of course Marxians make a fatal error in their assertion that early man was a horde with no direction. Thats pretty much a crock because lets face it, the division of labor is still in proto hunter gatherer siocieties and odds are they are not up on their Marx.

    Of course, you could run over to the post hegemonic stability theorists or you could flip over to Gramscian ethics...all of which rip off Hegel.
    This old anvil has cracked alot of hammers

  19. #19
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    Damn .... wrong thread.
    Last edited by DrRoebuck; 06-05-2008 at 09:31 AM.
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  20. #20
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    There was an interesting commentary on NPR's "Marketplace" last night about how the business cycle has mellowed in the past few decades, at least in America. Management of the swings is probably the best we can hope for.
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  21. #21
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    Quote Originally Posted by Sintesi
    Sure seems that way doesn't it? Embracing greed works fine for the economy in the short term as MM explains but it's so plainly cynical and corrosive over time even he seems depressed by it. Greed isn't fundamental human nature btw, it's been tempered by many cultures and societies past and present; there's no "must" about it, no biological destiny per se just a tendency in my opinion.
    Greed, to a certain extent, isn't a fundamental human nature but making choices in ones own self interest is. Greed and unethical behavior are the major problems with capitalism, regardless, capitalism is still the the best ideology with regard to economic growth and advancement there is.

  22. #22
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    Quote Originally Posted by Creakyknees
    Speaking of goofy mandated demands, I predict our next big bubble will be "green" stuff. Fed by regulation and mass hysteria, you can already see the roots of it sprouting.

    Seen the blips about bike sales? Hybrids? Check solar panel prices lately?

    Re: the OP, one of the big lessons of history is that human nature is not changing. You can call it greed, I prefer to see it as the modern manifestation of status for dominance / mate selection. Either way, it's pretty deeply hardwired in all of us that we want to be cooler than the next person. Competition for mates etc.

    +1 equilibrium is a myth. And besides, think about it a while - what would that be like in practice? No new products? No innovations? No net new population? (talk about command economies... Logan's run?). You wouldn't be able to build a swimming pool for your 1 child? Not even a hot tub and a deck?
    How about Star Trek intead of Logan's Run? That would be pretty good.

    I'm only thinking out loud so I'm not sure what I'm getting at but it seems as a system free markets (or economies whatever I'm supposed to say) have to grow grow grow to simply exist which, unless we do go to outerspace or annihilate a couple billions souls, is an ultimately doomed proposition if the resources can't grow w/ it. I'm not making judgements or calling this malignant or anything but that appears to be a bad scenario. But it's interesting that you bring Darwin into the equation because that's what I was hoping some genius economist had done and maybe surmised an evolutionary scenario where this bad ending doesn't occur and what would have to happen to make that so . That's why I was talking about Emergence earlier. Sometimes the system as a whole does some pretty remarkable even intelligent things although the tiny individual organisms that make up the entity don't control it or honestly know anything about it. Maybe societies and economies have that capacity. Or maybe not.

    XXL mentioned Galbraith and Thurow (thx) who I googled and it seems that Thurow was pessimistic because ultimately individuals invest for the short term and don't care what happens to human society after their dead. Primarily they care about themselves and their children. I think galbraith concurs but sees corporations as the saviour since as an entity it seeks to maximize it's power and insure it's survival forever (theoretically) . I didn't see anything about an endgame tho.

    What if someone came up w/ a virtually free and unlimited power source and we never had to worry about that ever again? What would "free and unlimited" do to our inner chimp's need for status and dominance? Nothing? I dunno. There's a lot of stuff hardwired into our heads that we suppress, overcome, sublimate, etc...

    Like I said I'm just thinking out loud.

  23. #23
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    Quote Originally Posted by ttug
    The logical conclusion of the Marxian idea was the Stufentgang which in a nutshell has aus all become this totyally care free species being.
    I thought that capitalism turns to socialism thus the creation of a "self regulared classless society". The Bourgeoisie exploits the Proletariat, or in other words I become a slave to the elite.

    The USA was created to install free enterprise, not capitalism. It wasn't until there was a big labor pool that capitalism could evolve. Then Capitalism turn into socialism. It seems like we see that happening now with this Green movment. Sustainable living, Carbon offsets, government regulated health care, and now a food shortage on the horizon. We might argue over why these things are happening, but there is no doubt these things are really happening.

    I just starting to get into all this. A friend of mine told me to read a book called “Capital is power” ( A concise summary of the Marxist analysis of capitalism) by Jorn K Bramann. I don't know if I can do it.

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    Quote Originally Posted by j__h
    Greed, to a certain extent, isn't a fundamental human nature but making choices in ones own self interest is. Greed and unethical behavior are the major problems with capitalism, regardless, capitalism is still the the best ideology with regard to economic growth and advancement there is.
    I agree w/ that, the proof is in the pudding, more people have more things, better health and longer lives than at any point in history. Right now anyway but aren't we sort of careening towards a sticky end?

    Maybe it's not capitalism's fault, maybe we just make too many babies.

  25. #25
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    Quote Originally Posted by Sintesi
    I agree w/ that, the proof is in the pudding, more people have more things, better health and longer lives than at any point in history. Right now anyway but aren't we sort of careening towards a sticky end?

    Maybe it's not capitalism's fault, maybe we just make too many babies.
    the myth of ever expanding markets on a finite planet is the bedrock foundation of the current economic paradigm. The current system is broken and will only change when forced to by massive social upheaval. When the food and water wars break out it will get ugly.

    /star trek holodeck would be the end on mankind...no one would leave
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