Why Do we Have Business Cycles?

So items would have prices, which would be expressed in labor credits. So I can see how a price system would solve the calculation problem. I assume that each individual collective workplace would set the price (based on market demand) for the item it produced.

Now I'm curious about the credits. How would these be represented? I imagine that they would be maintained in some sort of account, much like we keep our dollars in a bank, and that they would be used very much as we use money today.

Also, how would the people who work get assigned credits, and who does the assigning? I assume that various types of labor would be worth less or more credits. For example, a brain surgeon would earn more labor credits for one hour of her work than would, say, a worker who sweeps the workplace floor.

 

Actually the waste from food production will happen regardless of the system. It isn't from overproduction, it is caused by issues of mass production of food. Much of the food that is harvested is lost to spoilage, vermin or being harvested too ripe or too early. All modern farming methods have a fairly large amount of waste. The only way to avoid it is to go back to a pastoral harvesting cycle where dozens of workers spent weeks in each field picking fruit as they ripened, then only using products locally, avoiding loss during transportation.

Actually, the capitalist paradigm avoids any kind of waste. It constantly pushes for better and better efficiency in order to maximize profit. Waste reduces profits.

 

Of corse there will be welfare, we don't want people who have the ability to work not working though. The current welfare system is used to keep people complacent when they lose their job, obviously the abuse has a tiny impact on the system compared to the rich who consume in the form of spending money thousands of times more than they contribute.
You could call it a pay check, but it's only used to represent labor and cannot be traded and once used is destroyed.

 

In a planned economy there is no market demand. I suppose that if there was a shortage of doctors we could compensate them more, but as long as there are enough we'd pay them whatever is deemed a fair amount considering the hours and stress, decided democratically. Boring jobs don't have to really exist, everyone in the workplace could spend 2 minutes cleaning, for example.
Yes, we would have some form of "bank", but the role would be different.

 

I thought that people demanded items by filling out their weekly order form and paying for their request with labor credits. These orders and payments are the signals that producers need to determine what to produce.

I'm trying to decide who the "we" is in the above quote. I understand that each collective workplace would be democratically run, but are you saying that there would be some central authority that sets how many credits each type of worker is to be paid? Or are the credits paid by each collective workplace? And regardless of who is paying the credits to the workers, how does this payer get the credits in order to give them to the worker?

EDIT: It occurred to me that the collective workplace would receive the credits as payment for the items it produced, so I may have the answer to how each collective workplace acquires credits to give to its workers. You can correct me if I'm wrong.

I suppose any collective workplace could have whatever rules that the workers want.

I imagine it would be a place into which a worker could place his credits for safekeeping and so that he could draw checks/debit payments out of it to make purchases.

I'm still wondering how each collective workplace will go about acquiring the materials and machines necessary to produce their items. I'm also wondering how any particular collective workplace will decide what it is they are going to produce without some sort of central plan. It would seem that any collective workplace would have an incentive to produce items that can be sold for the most credits relative to the credits required to pay for inputs.

 

Yes, yes, yes, socialism is just as stupid as capitalism - we get it.

Now the real problem today is that the landless are forced to support a hoard of idle parasitic landowners (as well as other individuals who hold government-issued privileges -- aka, the rich), plus pay taxes to fund the government. And then when the greedy landowners demand even more for the use of land than the market can bear, those landless mother f-ers can’t do anything, it’s the unemployment line for them.

Name one rich capitalist who doesn’t hold a government-issued privilege or work directly for someone who does … can you do it? I really don’t think so.

Capitalism and socialism are designed to benefit the privileged at the cost of the productive … I can’t stand either system. Free markets are not the problem … privilege is the problem, and the only way to end the business cycle is to abolish all government-issued privileges or tax away the advantages they confer to the owners.

 

How much income should a “brain surgeon” make?

Maybe the only reason brain surgeons make so much income is because the American Medical Association (AMA) is privileged to control the number of licenses issued.

Maybe being a brain surgeon is actually an easy job. Maybe the only reason that it seems like a difficult job is because the privileged people doing it are really stupid … and they make it look hard?

Maybe the guy sweeping the floor would make a better brain surgeon than the one doing it now? Maybe the only reason he is not doing brain surgery is because he didn’t have the resources to pay for the privilege.

The fact is that you have no clue as to what a brain surgeons income should be, for you have been totally indoctrinated by government-issued privileges. You are a government lover, an apologist for government-issued privilege, and you don’t even realize it.

 

Democratic input will not correct the economic calculation problem.

How would new technologies come about? Who would own the capital? How would the best use of scarce resources be determined? Who gets to write the catalog? Who will own the capital, who will determine how many resources are to be mined, which materials to use, and how to do so most efficiently? How can anyone possibly know this without market prices? What would happen to entrepreneurship?

You assume that everything people want in some catalog can be produced. The reason a market is necessary is because unlimited human wants are acting upon scarce means of obtaining those wants. The means must have a price as well (I am referring to capital here). Do you democratically plan how many tractors should be built, how many and what machines should be produced, and what resources are best to go into those machines? Does everyone

Any continuous overproduction or malproduction is almost always the result of government intervention and failed central planning. During the Great Depression, for example, government paid farmers to destroy their crops to keep the price high. Let that sink in--the US government under FDR paid farmers to destroy crops as the American people were starving and impoverished. As for throwing away half our crops: Can you point me to something explaining that? I am curious. I have heard consumers waste a ton of food, but I have never heard that half of all produced crops in the US are destroyed.

This is due to the devaluation of our money, the result of the inflationary policy of the Federal Reserve. Our central (as in central planning) bank creates money, gives it to banks who get rich off of it, and the rest of us see prices rise as a result and wages do not increase as they would. Money is transferred to the top as a direct result of central planning, not the free market.

 

So people who are more productive get paid more labor credits. On the market, people who are more productive get paid more money. Its the exact same principle...calling your new money "labor credits" doesn't make it somehow better. The difference is the price of goods in labor credits is not determined by supply and demand. It is arbitrary. How do you determine how many labor credits each item would be? That is the same economic calculation problem as any other form of central planning, democratic or not.

 

No, the market does not reward according to contributions - it's a race to the bottom for the workers. If the market was a genuine meritocracy as upperclass people claim then bosses wouldn't be paid more than workers who work just as much.

 

Basic error! You'd have to assume that the market is characterised by zero underpayment. It isn't. And, once we look into the determinants of that underpayment, we realise that hierarchy is integral. Internal labour markets, for example, will be constructed around artificial human resource management methods that make productivity a rather insignificant secondary issue

 

Have you ever held the responsibilities that those bosses have? Most of the management members that I know work much harder and do far more than the average laborer.

 

Yes, the average low level boss works harder and probably has to deal with more stress than the average worker. This doesn't change the fact that they're still overcompensated many times over.
The authoritarian functions of your average boss are only necessary in our failing market system. Genuine administrative functions can be effectively fulfilled by choosing "managers" democratically from the ranks of the workers who would be subject to immediate recall.

 

I'm unclear about what you are referring to as "government-issued privilege", but in general I oppose when the government grants special privileges to some at the expense of others.

Your comments about landowners causes me to think that you regard land ownership as a government-issued privilege. With this I would disagree. The concept of land ownership is orthogonal to the concept of a government. (And by government here, I refer to a coercive, monopoly state.)

 

Should make? I've no idea. Prices are determined between the buyer and seller.

I agree that the AMA is a government-issued monopoly, and is thus anti-market, and as such, I oppose it.

This could be possible. Perhaps lifting the government monopoly would be a way to allow those who are smarter and better to do the brain surgery more easily and cheaply.

Another good reason to eliminate the AMA and all government issued privileges with regards to health care.

I think you're mistaken regarding my love of government and government privilege.

 

You'd have to assume market power and therefore the irrelevance of the market. Go ahead!

 

Why would I have to assume that?

Price is simply what one gives in an exchange. When I pay $1 for an apple, to me the price of the apple is $1. To the apple seller, the price of the $1 is one apple. Price is an observable phenomenon.

 

Your partially right, booms and busts would be eliminated for a steady decline and an unavoidalbe disaster. You can't replicate the allocative efficiency of markets, there's just simply no way to aggregate the amount of information that'd be needed. Of course planning still exists within the firm, but that serves a different function; reducing transaction costs, price and demand management and sadly the growing similarities between managers and bureaucrats.

So because bureaucrats are in control of capital suddenly demand doesn't exist? That's just plain silly, demand and the market still exist even if we're talking about an economy that's entirely centrally planned.


As for the thread, there are theories aplenty for why the business cycle exists. I'm not fond of the animal spirits explanation, it's not consistent with what we know to be true; managers anticipate change and react before it's occurred, the Keynesian explanation basically implies that people who spends millions of dollars on market research are somehow oblivious of what's really going on, like dust in the wind. The Austrian explanation has holes too, if it's interest rates and misallocation of capital, why hasn't every industrialized nation who's stuck in the low interest rate rut had the exact same problem?

No, I don't have a better explanation, but I also don't believe that any of the theories about it provide a complete explanation

 

The problem is that you do not understand supply and demand. If it meaningful then there is no buyer and seller decision: there is no price making decision, it is determined by the market

 

Are you saying that when a sale occurs the buyer and seller haven't agreed on a price? I'm unclear about what point you're trying to make.

 

Its a simple point: unless there is market power, there is no price discretion. Prices are determined by supply and demand at the market level

 

Bill Gates ignored government until they wanted a piece fo the Microsoft pie and filed a law suits. The owners of Google, Facebook, etc.

 

This is where your argument falls apart. How can you possibly know who contributes more value? How do you know who works harder? In order to create a system of labor credits, you must claim to be able to know this objectively. Furthermore, someone may work incredibly hard, but they may not actually create anything of value. Should the man who spends 15 hours a day digging a ditch with a spoon be paid a large sum of money? Of course not. So merely "working hard" cannot be the basis for price.

 

Whenever a sale occurs the buyer and seller have agreed on a price. It is an observable attribute of their exchange.

 

The equilibrium price is determined by supply and demand and cannot be objectively known. It is purely theoretical. Real world prices are determined by entrepreneurs who are guessing the correct price (often with much research going into it). These guesses are based on their understanding of current supply and demand, but as human beings their understanding cannot be perfect. The closer the price is to the equilibrium price, the better the entrepreneur. Rarely is the exact equilibrium price ever met, and even if it were demand changes constantly. The next day the equilibrium price could very well be different.