Thursday, November 12, 2020

881: The Birth of the Market...

Let's begin with some economical theory......


Mercantilism is an economic policy that is designed to maximize the exports and minimize the imports for an economy. 


It promotes imperialism, tariffs, and subsidies on traded goods to achieve that goal. 


The policy aims to reduce a possible current account deficit or reach a current account surplus, 


and it includes measures aimed at accumulating monetary reserves by a positive balance of trade, especially of finished goods. 


In economics, a country's current account records the value of exports and imports of both goods and services. It is one of the three components of its balance of payments.


Till Adam Smith (1723 -1790) and his famous book "The Wealth of Nations" (1776) the belief to get rich as a country was based on the idea of exporting a lot and importing as little as possible.


Adam Smith introduced the idea, that you can create an economy of constant growth. This is still our holy grail: the economy has to grow.


In our time this sometimes leads to the question of how much and for how long does the economy still has to go on growing and to what purpose?


For Adam Smith the.purpose was clear. Growth means the increase in the wealth of a nation and an increase in the wages of workers.


To achieve this growth, an important condition must be met. There must be sufficient market forces, 


because only then can participants in economic life freely exchange the goods or services they produce. 


Against this background, Smith makes the famous comment that we do not owe our meal to the benevolence of the butcher, brewer, or baker but to the fact that they have their own interests in mind. 


” A commercial society can meet almost any need because there are countless specialists who serve only a small part of the market but together achieve a comprehensive and varied offer, ”said Adam Smith. 


It is important that the transport costs are not too high. Perhaps more important, however, is the absence of legal, social, or political blockages that hold back free trade. 


Smith, therefore, makes an ardent plea for an unimpeded circulation of goods, labor, and capital.


“This is not limited to economic life in his own country. Free trade is equally important when it comes to exchanges between countries ”, he says.


Adam Smith also analyzes how market forces function and is thus at the beginning of economics as a science. 


The starting point is that the real value of a product depends on the amount of labor that was required to produce it. 


However, that value does not always correspond to the price that people pay for that product on the market. 


After all, the market price depends on the relationship between supply and demand. If the supply exceeds the demand, competition will arise among suppliers, causing the market price to fall.     


The reverse is also true: if the supply falls short of the demand, the buyers will compete, so that the market price rises. The process of adjustment will continue until supply and demand strike a balance.


In that situation, producers do not sell more goods than buyers are willing to buy, while at the same time meeting social demand effectively. 


Smith has the credit for first understanding the mechanism involved. Moreover, he believes that this is the best way of serving the public interest.


Those who represent their private interests in the market often help the public good more effectively than when they consciously pursue this is Adam Smith's conviction.


And his theory and application of it in the real world has brought us where we are now with Spaceship Earth...


Thank you for your attention.....

 The Discussion

[13:18] .: Beertje :. (beertje.beaumont): Thank you Herman

[13:18] herman Bergson: Take your time to digest this :-)

[13:18] herman Bergson: But it is our reality

[13:19] Particle Physicist Bejiita (bejiita.imako): (compiler is churning)

[13:19] Particle Physicist Bejiita (bejiita.imako): there

[13:19] Particle Physicist Bejiita (bejiita.imako): puh

[13:19] Particle Physicist Bejiita (bejiita.imako):

[13:19] Particle Physicist Bejiita (bejiita.imako): hmm its  a baseplate I guess

[13:19] andrea (andromedaprime): and so it's all messing up big time for what reason?

[13:19] herman Bergson: Here you witness the basic idea of infinite economic growth...

[13:19] Particle Physicist Bejiita (bejiita.imako): for how our current system works

[13:20] Particle Physicist Bejiita (bejiita.imako): there is one issue I saw in the beginning,

[13:20] Particle Physicist Bejiita (bejiita.imako): he wished wages increase for the workers but they get nothing, the boss takes everything

[13:20] Particle Physicist Bejiita (bejiita.imako): and the stock owners

[13:20] Particle Physicist Bejiita (bejiita.imako): the rest

[13:21] CB Axel: It seems to me that part of the problem is that the growth isn't spread over everyone.

[13:21] Particle Physicist Bejiita (bejiita.imako): so it did not go really tom plan there

[13:21] Particle Physicist Bejiita (bejiita.imako): to

[13:21] CB Axel: Like Bejiita is saying.

[13:21] herman Bergson: Since the 1980s this is true Bejiita

[13:21] Particle Physicist Bejiita (bejiita.imako): hmm

[13:21] Particle Physicist Bejiita (bejiita.imako): and thus the inequality increases

[13:21] CB Axel: The growth spreads to 1 or 2% of the population and all that trickles down to the people doing the actual work is shit.

[13:22] Particle Physicist Bejiita (bejiita.imako): so true cb :(

[13:22] herman Bergson: In Smith's time there was a lot of, every penny extra people earned was a step to prosperity

[13:22] Particle Physicist Bejiita (bejiita.imako): the sad truth

[13:22] Particle Physicist Bejiita (bejiita.imako): ah

[13:22] Ari (aristippuscyrene): "The starting point is that the real value of a product depends on the amount of labor that was required to produce it." The real value of a good or service seems to be the degree to which it increased pleasure and/or diminishes pain.

[13:22] CB Axel: Prosperity? Or just not dying?

[13:22] herman Bergson: Yea,,, the famous Trickle Down theory....that has shown to be a hoax

[13:23] Particle Physicist Bejiita (bejiita.imako): hmm what a hoax indeed

[13:23] Particle Physicist Bejiita (bejiita.imako): it did not factor greed into the equation

[13:23] CB Axel: Ari, maybe Smith should have said the cost of the product instead of the value of it.

[13:23] Particle Physicist Bejiita (bejiita.imako): an unfortunate side effect

[13:23] herman Bergson: Yes Ari, but that has to be translated into money

[13:23] andrea (andromedaprime): it's the piss what trickles down :-)

[13:24] herman Bergson grins

[13:24] Particle Physicist Bejiita (bejiita.imako): bosses piss on the workers while sailing their yachts in their tax paradises

[13:24] herman Bergson: Maybe right, Andrea

[13:24] herman Bergson: Beware.....

[13:24] Particle Physicist Bejiita (bejiita.imako): the reality of today at least for some companies

[13:24] Ari (aristippuscyrene): I am not convinced that there is much of a relationship between money and value.

[13:25] herman Bergson: This discrepancy between poor and rich in Bejiita's sense is a present-day phenomenon

[13:25] CB Axel: That depends, Ari, on what you value. If all you value is money, then it's a great relationship. :)

[13:25] Particle Physicist Bejiita (bejiita.imako): i guess in the beginning it started out good but then....

[13:26] herman Bergson: You bake a bread.....its value is that it will feed the hungry....

[13:26] herman Bergson: but f you don't translate it into money...what should the baker do?

[13:26] Ari (aristippuscyrene): That would be valuable

[13:26] andrea (andromedaprime): would you say that making money out of money is the root problem?

[13:27] herman Bergson: Several cultures already recognized that Andrea

[13:27] herman Bergson: Koran and Bible say so

[13:27] CB Axel: When the zombie apocalypse comes people who can grow their own food and build their own shelters will be wealthy. The 2% can eat their gold.

[13:28] Particle Physicist Bejiita (bejiita.imako): hehe indeed

[13:28] Particle Physicist Bejiita (bejiita.imako): maybe should try to mutate zombies with my Chernobyl reactor next

[13:28] Particle Physicist Bejiita (bejiita.imako): lol

[13:29] CB Axel: LOL

[13:29] herman Bergson: Smith paves the way for the entrepreneur......he supplies the money to provide for the production means

[13:29] Ari (aristippuscyrene): The market does not do such a great job provisioning public goods nor at protecting commons.

[13:29] andrea (andromedaprime): by creating money out of thin air - monopoly money?

[13:30] herman Bergson: We are discovering that the market forces aren't that magical thing Smith believed it to be

[13:30] andrea (andromedaprime): market makers manipulate the market

[13:30] CB Axel: That's why we need the regulations the neo-liberals want to eliminate.

[13:31] andrea (andromedaprime): monopolies corner markets

[13:31] herman Bergson: AT least Smith was against monopolies

[13:31] herman Bergson: HE saw them as a great evil

[13:31] Ari (aristippuscyrene): The success of markets depends on the virtuousness of the people participating in it.

[13:31] CB Axel: Goody for him

[13:31] andrea (andromedaprime): the money mafia is in control

[13:31] Particle Physicist Bejiita (bejiita.imako): it is like a computer program that was good at first and then others riddled it with bugs and now needs serious debugging to go back to its working state

[13:32] Particle Physicist Bejiita (bejiita.imako): totally crippled

[13:32] CB Axel: That sounds like a good analogy, Bejiita.

[13:32] Particle Physicist Bejiita (bejiita.imako): well its what I do all time om my spare time

[13:32] herman Bergson: Indeed....and this process is on its way, Bejiita

[13:32] Particle Physicist Bejiita (bejiita.imako): however I don't think my game development can save the economy bugs sadly

[13:32] Ari (aristippuscyrene): The focus should be on elevating virtuousness, and a certain amount of property is required to do so.

[13:33] Particle Physicist Bejiita (bejiita.imako): but indeed the analogy is basically right on

[13:33] herman Bergson: Even our super liberal Primeminister said that the market isn't the do it all for us

[13:34] herman Bergson: As the theme of this project...the rough awakening from neo-liberalism....things are happening...

[13:34] Particle Physicist Bejiita (bejiita.imako): in the right direction

[13:34] Particle Physicist Bejiita (bejiita.imako): that would be good

[13:35] herman Bergson: Whan in 18989 the Wall fell in Berlin they thought \o/ Liberalism has won and is the only right social system...

[13:35] Particle Physicist Bejiita (bejiita.imako): squish some greed bugs and other issues out

[13:35] herman Bergson: 1989

[13:35] herman Bergson: Now we are discovering that this isn't true

[13:36] Particle Physicist Bejiita (bejiita.imako): aaa yes that really set it off

[13:36] Particle Physicist Bejiita (bejiita.imako): i guess

[13:36] andrea (andromedaprime): is Biden intent on bringing back Glass-Steagall then?

[13:36] herman Bergson: Glass-Steagall?...what does that mean, Andrea?

[13:37] andrea (andromedaprime): "The Glass–Steagall legislation describes four provisions of the United States Banking Act of 1933 separating commercial and investment banking."

[13:37] andrea (andromedaprime): Clinton got rid of it and the banks went rogue

[13:37] herman Bergson: Ahh...

[13:38] Particle Physicist Bejiita (bejiita.imako): ok

[13:38] CB Axel: I'm not sure what Biden will do about that.

[13:38] CB Axel: But the banks definitely need to be regulated.

[13:38] herman Bergson: It led to the 2008 crisis, I guess?

[13:38] CB Axel: They have proven that they cannot be trusted on their own.

[13:39] herman Bergson: That is true CB

[13:39] andrea (andromedaprime): yes - I think it was a major factor... also, what about outlawing share buy-backs??

[13:39] Particle Physicist Bejiita (bejiita.imako): hmm indeed 2008 the banks really went Chernobyl, and the entire world stopped esp everything related to building went bankrupt

[13:39] herman Bergson: If I am not mistaken that buyback ado makes people only richer...

[13:40] Particle Physicist Bejiita (bejiita.imako): a newly built door factory next to us went out of business immediately

[13:40] CB Axel: That's another regulation neo-liberals are against but is needed because the CEO's can't be trusted.

[13:40] andrea (andromedaprime): yep

[13:41] Particle Physicist Bejiita (bejiita.imako): indeed

[13:41] Particle Physicist Bejiita (bejiita.imako): CEOs are controlled by greed

[13:41] Particle Physicist Bejiita (bejiita.imako): = not a good thing

[13:41] andrea (andromedaprime): so, basically our economic system encourages and fosters and protects the greedy.... great system!

[13:42] herman Bergson: We have a long way to go in this project to find out what proper alternatives can be for neo-liberalism...:-)

[13:42] Ari (aristippuscyrene): higher corporate taxes > higher r&d > increases in the quality of goods and services. When corporate taxed are low, investors are more tempted to put the profits into their pockets rather than r&d.

[13:42] CB Axel: Workers are considered to be schmucks who don't deserve anything.

[13:42] Particle Physicist Bejiita (bejiita.imako): true andrea

[13:42] Particle Physicist Bejiita (bejiita.imako): indeed that factor goes out of control quickly if unregulated as it is now

[13:43] Particle Physicist Bejiita (bejiita.imako): all while the CEO and bosses scream in choRUS MORE AND MORE AND MORE!

[13:43] herman Bergson: Since the 1980s wages haven't increased, while the profits increased enormously are right

[13:43] Particle Physicist Bejiita (bejiita.imako): :(

[13:44] andrea (andromedaprime): what the neo-cons/liberal elite consider a free market is just a market dominated by them

[13:44] andrea (andromedaprime): even Adam Smith wouldn't approve ;)

[13:44] Particle Physicist Bejiita (bejiita.imako): should be renamed the boss market

[13:44] Particle Physicist Bejiita (bejiita.imako): or the CEO market

[13:44] herman Bergson: I agree that we are far away from the basic beliefs of Adam Smith today

[13:44] CB Axel: Yes. They want the freedom to do whatever they want.

[13:44] andrea (andromedaprime): right

[13:45] andrea (andromedaprime): the freedom to control everything for their benefit, by force if necessary

[13:45] herman Bergson: What is learned from the 2008 crisis is that there are two worlds....

[13:45] herman Bergson: a financial market, only dealing with money and a real economy where the real value is produced...

[13:46] herman Bergson: and it seems that these two worlds are completely alienated from each other

[13:46] Particle Physicist Bejiita (bejiita.imako): then anothera bit unrelated thing is how can it be that a football player who doesn't really produce anything of value (well its enjoyment but) can earn 1000000s per month?

[13:46] Particle Physicist Bejiita (bejiita.imako): enjoyment

[13:46] andrea (andromedaprime): note that the 2008 crisis was highly profitable for the few while their agents visited austerity on everyone else

[13:47] herman Bergson: those are the myths we believe in Bejiita....

[13:47] Particle Physicist Bejiita (bejiita.imako): hmm

[13:47] CB Axel: Actors and musicians, too, Bejiita. But I'd say entertainment is a valuable product. :)

[13:47] Particle Physicist Bejiita (bejiita.imako): well it surely is but those numbers are just well staggering

[13:47] andrea (andromedaprime): to be an actor or not to be an actor: that is the question.... :-)

[13:47] Particle Physicist Bejiita (bejiita.imako): while others as said have nothing

[13:47] herman Bergson: Why paying 24 million for a Van Gogh painting?

[13:48] andrea (andromedaprime): how did they make the 24 million?

[13:48] CB Axel: It sure isn't helping Van Gogh.

[13:48] Particle Physicist Bejiita (bejiita.imako): the thing is what should one person do with such a sum of money?

[13:49] Particle Physicist Bejiita (bejiita.imako): other than show off

[13:49] andrea (andromedaprime): buy paintings of course ;)

[13:49] herman Bergson: The magic of the financial markets Andrea.....and they took all that money from those who produced real value in the real economy

[13:49] andrea (andromedaprime): oh no really Herman.... that would be corruption surely?

[13:49] Particle Physicist Bejiita (bejiita.imako):

[13:50] andrea (andromedaprime) looks all sweet and innocent

[13:50] herman Bergson smiles

[13:50] herman Bergson: I sometimes think of a law that forbids individuals to own more than...say 10 million dollars....

[13:50] Ari (aristippuscyrene): Some questions this chat has sparked in me: What are humans really like (homo economicus?) What drives progress most (curiosity and play vs. alleviation of suffering (think medical research)?

[13:51] herman Bergson: all they own more has to go to the state and be redistributed among the people

[13:51] Particle Physicist Bejiita (bejiita.imako): hmm some cap there should be

[13:51] CB Axel: I think people should be allowed to have all the money they want, but tax the hell out of them.

[13:51] herman Bergson: that is the same, CB

[13:51] CB Axel: Use that tax money to help out the people they've crushed to gain their wealth.

[13:51] Particle Physicist Bejiita (bejiita.imako): the thing is not a few should own 99% of all wealth

[13:51] andrea (andromedaprime): i find it instructive that the non-human world runs just fine without economics

[13:52] Particle Physicist Bejiita (bejiita.imako): it should be more even

[13:52] herman Bergson: Indeed...that is a most important observation, Andrea

[13:52] Particle Physicist Bejiita (bejiita.imako): even

[13:53] Ari (aristippuscyrene): Social animals have an economy but not much by way of currencies.

[13:53] herman Bergson: Reading Yuval Noah Harari 's Sapiens is most instructive in this context :-)

[13:53] Particle Physicist Bejiita (bejiita.imako): aaa indeed Andrea

[13:54] Particle Physicist Bejiita (bejiita.imako): the economy is our own creation

[13:54] Particle Physicist Bejiita (bejiita.imako): but also we are the only species capable of producing stuff

[13:54] herman Bergson: Like private property is Bejiita

[13:54] Particle Physicist Bejiita (bejiita.imako): farming, factories, etc

[13:54] herman Bergson: How can you own a piece of land....a piece of this planet???

[13:54] andrea (andromedaprime): i just hope we don't have runaway global warming -> Venus!

[13:54] Particle Physicist Bejiita (bejiita.imako): hmm

[13:54] herman Bergson: Locke discovered a myth.....

[13:55] Particle Physicist Bejiita (bejiita.imako): indeed Andrea esp with enough pollution to get a good acid rain as well

[13:55] herman Bergson: when you add value to the land by working may call it your property

[13:55] andrea (andromedaprime): tell that to slaves, Herman!

[13:55] herman Bergson: He just made that up and we all believed him

[13:55] andrea (andromedaprime): or to tenant farmers

[13:56] Ari (aristippuscyrene): a convenient way to decimate hunter-gatherer cultures.

[13:56] Particle Physicist Bejiita (bejiita.imako): well it's your work put in there but

[13:56] herman Bergson: Indeed Ari...and that is what happened historically

[13:56] andrea (andromedaprime): this land is our land.....

[13:56] Particle Physicist Bejiita (bejiita.imako): hmmm tricky limit there

[13:56] Particle Physicist Bejiita (bejiita.imako): still its part of the planet

[13:56] herman Bergson: just htink how the European immigrants stole the land from the Indians....

[13:57] andrea (andromedaprime): it's my planet and i want you lot out now!

[13:57] andrea (andromedaprime) makes a stern face

[13:57] Particle Physicist Bejiita (bejiita.imako): oki! (flies to the moon and claims it as MINE)

[13:57] Particle Physicist Bejiita (bejiita.imako):

[13:57] Ari (aristippuscyrene): Space law is a thing.

[13:57] herman Bergson: Sorry BEjiita, but they already planted the American flag there :-)

[13:58] Particle Physicist Bejiita (bejiita.imako): that was YEARS ago! still no buildings there

[13:58] andrea (andromedaprime): and China's claimed the other side ;)

[13:58] herman Bergson: They can have cold and dark...:-)

[13:58] Particle Physicist Bejiita (bejiita.imako): gonna build my moon base Alpha there

[13:58] herman Bergson: But I guess...a lot to think about.....

[13:58] Particle Physicist Bejiita (bejiita.imako): and have Awesome BBQ parties!

[13:58] Particle Physicist Bejiita (bejiita.imako):

[13:59] herman Bergson: the invention of the idea of economic growth, private property, market forces, and its workings....

[13:59] CB Axel: I'm surprised Trump didn't send the Space Force to the moon to build a big, gold hotel.

[13:59] CB Axel: And a golf course.

[13:59] Particle Physicist Bejiita (bejiita.imako): hahaha

[13:59] Particle Physicist Bejiita (bejiita.imako): well

[14:00] herman Bergson: I guess your brains need some rest by now.....

[14:00] .: Beertje :. (beertje.beaumont): you give him ideas CB

[14:00] CB Axel: lol

[14:00] herman Bergson: so...go to a golf course or to the moon....:-)

[14:00] andrea (andromedaprime): i shall eat your brains!

[14:00] andrea (andromedaprime): yum yum fee fi fo fun :-)

[14:00] CB Axel: Or to a golf course on the moon

[14:00] herman Bergson: Enjoy your dinner Andrea ^_^

[14:00] Particle Physicist Bejiita (bejiita.imako): we can send him out thereafter he is kicked out of the wite house! ooo wait no we cant, I don't want that blubbering up to ruin my BBq parties!

[14:01] CB Axel: Stick an apple in his mouth and roast him.

[14:01] herman Bergson: Let me thank you again for your pleasant participation in our discussion.....

[14:01] andrea (andromedaprime): yeuch!

[14:01] andrea (andromedaprime): waste of an apple!

[14:01] CB Axel: Thank you, Herman.

[14:01] Ludova (quippe.wylder): What is the alternative to the way economics works now?

[14:01] herman Bergson: Take care you all,

[14:01] andrea (andromedaprime): yeah ty Herman :-)

[14:01] herman Bergson: Class dismissed ^_^

[14:01] Particle Physicist Bejiita (bejiita.imako): haha not sure i wanna eat him, probably taste like a sewer so full of shit he is constantly spewing out everywhere

[14:01] .: Beertje :. (beertje.beaumont): thank you Herman

[14:02] bergfrau Apfelbaum: thank you Herman and class!

[14:02] CB Axel: Ludo, maybe we'll talk about that some other time. :)

[14:02] Ciska Riverstone: thank you hermann  - thanx all

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