Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10.3 4.3bsd-beta 6/6/85; site ucbvax.ARPA Path: utzoo!watmath!clyde!burl!ulysses!ucbvax!mcgeer From: mcgeer@ucbvax.ARPA (Rick McGeer) Newsgroups: net.politics.theory Subject: Re: Re: Health Care, Wonderful Market fo Message-ID: <10355@ucbvax.ARPA> Date: Wed, 11-Sep-85 15:37:48 EDT Article-I.D.: ucbvax.10355 Posted: Wed Sep 11 15:37:48 1985 Date-Received: Thu, 12-Sep-85 11:54:36 EDT References: <1764@psuvax1.UUCP> <10300@ucbvax.ARPA> <1774@psuvax1.UUCP> Reply-To: mcgeer@ucbvax.UUCP (Rick McGeer) Organization: University of California at Berkeley Lines: 270 In article <1774@psuvax1.UUCP> berman@psuvax1.UUCP (Piotr Berman) writes: >> >/* Written 1:20 am Sep 4, 1985 by psuvax1!berman in inmet:net.politics.t */ >> >/* ---------- "Re: Health Care, Wonderful Market f" ---------- */ >> >Warning: may be boring. >> >> No, just wrong. >> >> >Market forces indeed. More schizofrenics, >> >obviously, will cause more people to care about schizophrenics. >> >Why? Because in the economics course they teach that demand increases >> >supply. What about another economical law - supply generates demand. >> >More charitable contributions - more schizofrenics (another way of >> >cutting unemployement in Libertaria). >> >> If you meant "economics" rather than economical -- in which case I don't know >> what you're talking about -- then it occurs to me that Samuelson, Hirshlifer >> and Addison were all remarkably reticent about this supposed "law". Offhand, >> I can't think of *any* economics text which states this "law", and I can't >> think why demand should rise to meet supply; nor can I think of any instance > ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ >> in which demand has arisen in response to a supply. I can think of instances > ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ >> where the consumption of certain products has risen when their supply curves >> moved leftward and down, but the demand for the product already existed. The >> consumption of small computers is an excellent example: the demand for their >> product, information, existed and was largely unmet -- as witness the (then- >> existing) demand for a host of substitute products. In contrast we can find in >> abundance many goods for which there is no demand whatever -- toxic chemicals >> and sand are two that spring to mind immediately. >> >> Piotr, I suggest a good freshman or sophomore economics course. If "PSU" >> is a university, I am sure that they have one or two to offer. However, if >> the reading list includes anything at all by noted nitwits such as Galbraith, >> go take a course at a reputable university. >> >> -- Rick. >> > >I happen to have a course in economics + I have read several books. As Rick >duly quoted, the "law" of demand increasing to meet suply was formulated (by >Say, if I remember), otherwise Samuelson, Hirshlifer and Addison could not be >> remarkably reticent about this supposed "law". Sorry, no mention at all in Kennedy, Hirshleifer or Lispey, Sparks & Steiner. Couldn't find my copies of Alchian & Allen or Samuelson. Can you give me a reference? >This law, although flawed, was not altogether irrational. The problem is >that ALL economical have limits on their application. The law of markets >says that if an abundance of a product emerges, then new uses are found, >and hereby the market for the product increases. That is a very different thing. In this case, the product is adapted to meet previously unmet demands. The difference is subtle enough that I can understand how someone could make this sort of mistake. Demands exist for abstract quantities: things that we group collectively as "the quality of life". Demands arise for products as they meet one or more aspects of that abstraction. What's the difference between that and Piotr's formulation? In practical terms, very little: however, Piotr's formulation carries with it an often-heard, and quite incorrect, implication about producers generating demands for their product, which in turn implies that consumers behave irrationally. And that is very wrong. >Rick cannot think of an instance in which demand has arisen in response >to a supply. >************************************************************************ >*Since my reading list includes noted nitwits such as Galbraith, * >*I can think, unlike others, who are learned in reputable schools. * >*Notabene, I was listening to my nitwits in MIT, not PSU. Regretfully * >*enough, I rely more on disreputable sources like history books, Wall * >*Street Journal and Fortune than on textbooks of economics. * >************************************************************************ If you believe a word of the garbage that Galbraith pumps out (unquantified theories, no mathematical models, lots of hand-waving) then you haven't thought about it much. Read Friedman On Galbraith for a point-by-point summary on the experiments done to test Galbraith's theories. History books? Fortune or the WSJ? Popularizers like Galbraith? These are truly not reputable sources, at least for economics. Suppose I told you that I relied on Carl Sagan, Popular Mechanics and Omni for my scientific information, as opposed to physics texts? What would you then think of the physical theories I presented in my postings? >As an example, if an abundance of small computers emerges, one uses >them instead of typewriters, calculators, file cabinets etc. Again, the demand for computers is merely an instance of a demand for information -- that demand was always there. Computers currently are the best tools for meeting it. >One may even invent uses, were never heard about, like flaming on net, >electronic billboards, programing as a pasttime etc. >Sugar, coffe, tea etc. were initially used as medicines and spices, once >abundance of those products appeared, they became staples. >Before their abundance, the need for sweetening everything or adding >foreign substances to water one drinks was barely existent. But the demand for sweets is in our genes -- it dates from the time when pre-men learned that sweet berries were safe and bitter berries weren't (they're either not ripe of poisonous -- in either case they'll make you sick). Again, THE DEMAND WAS THERE -- it just hadn't been met yet. >Currently, the law of markets is quoted as an example of limited scope >of economical laws, and that was exactly the reason I quoted the existence >of this law. Indeed. The limits of economic law are well-known: one cannot determine what people's motivations are, one can only deduce them, partially, from their behavior. >But you pulled my remarks out of context quite mercilessly. If I have, I apologize. But the article is there, for everyone to read. >The argument which I opposed was as follows: if there is a need (like >helping schisophrenics), free market (if unhibited) will supply help. >The claim was that the law of supply and demand applies here. >I claim it to be nonsense. But instead to argue with that, you prefer >to advise me to repeat my sophomore education. Since you are closer >(I presume, sorry if not true) to your sophomore year, may you please >explain how this law will apply here? Perhaps the price of a schisophrenic >will go down? Certainly. If there are a large number of untreated schizophrenics around (note spelling, Piotr), one presumes that they or their friends and relatives will desire that they be treated: cured if possible, controlled if not. Even strangers can be relied upon for generosity: each year, I contribute in the neighborhood of $1000 for the research and treatment of disease, none of which I or any acquaintance have, and most of which I will almost certainly never get (Parkinson's, Huntington's Chorea, Alzheimer's, MD...). Indeed, the private foundations for the research and treatment of the various genetic diseases (which in previous generations would have killed their sufferers at birth) are an excellent study in exactly how this occurs. >Seriously, that was a classical solution of this problem: shisophrenics >were werehoused in quite inexpensive, if not inhuman, fashion. That may >be a "free market solution", but I do not buy it as a preferred one. >Now you say that these were the abuses of the state monopoly on >psychiatric care for the not wealthy. I didn't say that. But remember the time. Neither the technology nor the societal wealth was there to do much better. Do we, now, do better by our unfortunates, given the wealth we have? If you think we do, come look at the streets of Berkeley sometime. >There is major flaw in applying the laws of economy to society >in general. Sorry, I don't buy that. Dr. David Friedman defines economics as the study of human behavior that begins with the presumption that people have objectives and behave rationally in an attempt to achieve their objectives. If you accept that definition, as I do, then you're forced to agree that economics is the study of a much broader field than the flow of commodities. If you don't, then you should be prepared to describe which aspects of human behavior economics predicts inadequately. I can give you a hand there, but as it happens I tend to believe that those areas beyond the obit of economics are as fundamentally unknowable as those beyond the obit of physics. And if the answer to some question is fundamentally unknowable, then I really don't care what the answer is. >The most general law is that the market has a tendency >toward equilibrium: the demand stimulates the prices up, the supply >stimulates the prices down. Increase of prices may stimulate the >production, decrease may stimulate removing marginal producers from >the market. The real problem is that the equilibrium does not imply >superior fulfillment of social needs. This is a common statement of leftwingers, and it is completely meaningless. What are "social needs"? Who sets them? Why are the demands met by the market not an adequate reflection of the generalized demands of society, if such things in fact exist? And how do you propose to measure how well or badly any system of organizing society meets "social needs"? When, or if, you can answer these questions, then we'll have something to talk about. Until then, you're just flaming. >Consider an example. Imagine that hiking, picknicking, hunting and fishing >increase in popularity in Libertaria. The owners of forests, streams >and mountains invest in building roads, trails, picknic areas etc. >The prices (especially in attractive areas) increse. The value of the >land in the attractive areas increases, and so the costs for the new >providers of the outdoor recreation. As the result, the fees for the >use of streams, paths, picknic tables, parking etc. go up. >Finally, only the more wealthy 50% of population may engage in outdoor >activities. Actually, this is a good example. You see, there's no particular reason that the costs of operating a park are in any realtion to the value of the land -- but then, you must know that price is only very indirectly related to cost. Actually, price is regulated by the interactions of supply and demand. What you'd see in Libertaria is that prices would rise, due to the increased popularity of ther activity. But then land would be diverted from other uses to outdoor recreational activity. The sum total would be that considerably more land would be used for outdoor activities, there would be more options for the backpacker, fisherman and hunter, and prices would probably rise slightly. However, if only the wealthy 50% could afford backpacking, I could set up a nice little business in offering cheap backpacking and camping trips. >Currently, by a statist mistake, majority of the attractive areas for >outdoor activities is public. Thus the fees are either not existent, >or small (like fishing licences). Everybody may engage in his/her >favorite form of outdoors. Since the land in question is public, >it is not a subject of trade, so the costs cannot be influenced by >the demand. Baloney. The cost of using anything is determined by the demand. The price may not be monetary, but it's there: as witness the hours people spend in line trying to get into Yosemite Valley. The real problem is that the price is not reflected in revenue to the supplier, which retards his incentive to provide more lands. Indeed, at the height of the backpacking craze, James Watt wanted to retrench the supply of public lands devoted to that activity, the better to put strip-mines in. Don't flame at Watt -- he was appointed by an elected President and confirmed by an elected Senate. The point is that in a command system, the guy who gets to give the orders can give any he likes, whether that has anything to with what people really want. Think about it. >Let us compare the outcomes of two processes: free market and state >regulated. In free market, the portion of GNP related to outdoor >recreation would go up considerably, thus the economic indicators >would measure an increase in satisfying social needs. As I mentioned above, I don't believe in "social needs". People have needs. Society doesn't. And I don't think that economic indicators as aggregate as GNP (or the Dow, for that matter) measure anything very interesting. >In the current statist model, GNP barely suggest that public lands >satisfy a major social need. However, not 50% but 100% has the >ability of participation. Wrong, wrong, wrong. If you think that 100% of our population can use our public lands, think again. In the first place, what happens when everybody decides to go there at once? (And if you think this is impossible, just try Muir Woods any weekend, or Yosemite Memorial Day, the 4th of July or Labor Day). And in the second place, almost all the activities you mention require transportation to the park, and equipment when you get there. If we take downhill skiing as the example of an outdoor activity that is practiced on almost exclusively private property, we note that the cost of the lift is rivalled by equipment and lodging costs. In fact, a quick survey of the people that I meet in our national parks shows that the majority are very yuppy -- I don't think that I've ever met a poor individual in a national park. Come now, Piotr. This is yet another diversion of the upper and middle class subsidized by the state. One can say what one likes about Marie Antoinette, but at least she never had the crust to argue that the state should subsidize her pleasures on the grounds that the poor could then participate. On the whole, I prefer a thief who admits that he's stealing. >As a student, I was very happy that >I could hike in Boston Blue Hills or NH White Mountains without a >charge. Similarly, not wealthy farmers and workers of my part >of Pennsylvania are quite happy with the state beaches, hunting >grounds, streams etc. I doubt that they long to a pure market >model. Paraphrasing my libertarian friends "they believe in a >Ponzi scam, they payed taxes for those things and now they are >deluded to think that they got something for nothing". In fact, >most of those people never had sophomore course in economics. >They just do not believe that everything should cost money. "Most of these people never had a sophomore course in physics: they just believe that water should run uphill and teakettles should boil when set on a cake of ice." Everything does cost money: TANSTAAFL! Only fools, children and leftists believe otherwise. What you really mean is that "They believe that their pleasures should be paid for by everyone else". Hell, I agree. It's a terrific deal, if you can get it. I just don't have the stomach or the gall to demand it. -- Rick.