[radon1]

They are each better off because instead of a surplus they have something they did not have before, they traded their profit (surplus) for something of value.

Absolutely. The only qualifier - is that they did have this "something" before, because the staticism of the system pre-supposes that the system has been in this state over a long-term (essentially, over infinity, for the modeling purposes) and settled for equilibrium.

At the stage where they first met each other and started their exchange they could actually make some "profit" for a while, until they settled for equilibrium. And their living standards rose, as a result.

[Pops]

I think semantics is a big part, Kub. But as well is the belief that capitalism is bad. That i the entertaining part of the discussion.

If you ask Pete and Ralfy I think they would say capitalism is the mother of all evils and it's destruction is an existential priority, hece their unwavering belief that it will.

[Pops]

However, while trade has existed since early in human history, it was not capitalism.

Come on Strum, you have to stick with your own argument which was

And in turn, that revenue depends on your customers' ability to pay. And that ability again depends on someone else's costs.

The customer's ability to pay doesn't come from some "outside source" as you previously argued, it comes from his production.

But as far as the latest wiki quote, of course trade was not always capitalism. Capitalism presupposes a need for productive assets such as machinery, etc. But as mentioned before they need private property protection and laws to protect them from oligarchs, monopolies, etc.

[Strummer]

The ability to *trade* comes from surplus.

The ability to *pay enough to actually create a profit* comes from the outside.

The first case is just trade, the second is capitalism.

Anyway, can you post some historic examples of capitalist economies which were not based on a rapidly expanding supply of natural resources or rapid population growth or exploitation of workforce outside the system? I don't think there are any.

[kublikhan]

I think semantics is a big part, Kub. But as well is the belief that capitalism is bad. That i the entertaining part of the discussion.

If you ask Pete and Ralfy I think they would say capitalism is the mother of all evils and it's destruction is an existential priority, hece their unwavering belief that it will.

But behind the veneer and semantics, how much do you guys actually disagree with the meat and potatoes of a no growth economic system?

Basic value add:
1. Baker owns ovens.
2. Baker buys flour.
3. Baker turns flour into bread.
4. Baker sells bread in market.
5. Baker trades proceeds of sale for butter and other essential goods.
6. Baker uses some proceeds for oven maintenance.

Is this basic value add phase controversial? What about an expansion phase?

Expansion:
7. Baker uses sale proceeds to buy cow.
8. Baker uses milk from cow to make butter.
9. Baker now sells both bread and butter.
10. Baker puts former butter maker out of business.
11. Total GDP does not change. But individual businesses rose and fell.

Anyway, can you post some historic examples of capitalist economies which were not based on a rapidly expanding supply of natural resources or rapid population growth or exploitation of workforce outside the system? I don't think there are any.

Recessions?

[Pops]

The ability to *trade* comes from surplus.

The ability to *pay enough to actually create a profit* comes from the outside.

No, you just made that up.

In the simplest, the capitalist uses capital and the labor of one or several or a million wage earners (who work part of the day for themselves) to make a profit.

Marx pointed out that the true basis of capitalism is labor's willingness to work for a wage less than his total output. That I know we can all see everywhere around us in our co-workers and maybe even in ourselves. The capitalist risks loss, frets the pennies and sometimes comes out on top. The worker by and large punches the clock and goes home.

--About historical capitalist economies
I don't know one right off the bat, but then there are not a lot of examples of democracies with private property rights who weren't mercantilist either.

[evilgenius]

More importantly, under deflation, the money supply is always shrinking. I hear a lot of people talking about falling prices being the cause of deflation. A money supply shrinking at a rate is actually the cause, though. The falling prices are a micro-economic factor, affecting local decisions. The shrinking money supply is macro-economic, affecting the ability to loan, which has a knock on effect that further shrinks the money supply. The money supply, and its affect upon both local and non-local decision making, is a better arbiter of increase or decrease.

The Fed is attempting to address the money supply by using QE and other tools. The use of those tools, however, is only keeping us running in place. There isn't much growth as a result. You need growth.

But there is growth in the money supply. US money creation took a header during the financial crisis. Between 2008 and 2010, money growth swung from 15% to -5%. However since 2010 money supply has started growing again. It's back up to the level it was around 2004/2005:
Money Supply Charts

Which speaks against deflation. On the other hand, with all of the QE the money supply ought to be far larger. I mean, by factors.

But QE is a limited tool, and so is the Fed. They can only say no to the politicians by raising rates on them to put an end to their petty games. When the situation is truly that of deflation, or an inflationary expansion that threatens bubble territory, that doesn't always help everybody.

[Pops]

I think that trade in a no growth world and in a de-growth world is not only possible but the only way to not go through life eating grubs and wearing skins. Specialized work improves efficiency making greater surplus possible, surplus traded improves life. No big secret.

"No Growth" per se is improbable simply because there will always be ups and downs of population, resources, etc.

The only thing capitalism adds is additional efficiency through scale.

It could be syndicalism, which achieves the same thing with worker ownership but we come back to the pretty obvious fact that not everyone wants to be an owner.

[radon1]

Basic value add:
1. Baker owns ovens.
2. Baker buys flour.
3. Baker turns flour into bread.
4. Baker sells bread in market.
5. Baker trades proceeds of sale for butter and other essential goods.
6. Baker uses some proceeds for oven maintenance.

He cannot buy or sell anything but butter from anyone, because there are no people in the world except him and the butter guy. Together they form a closed static system.

He does everything himself within the scope of the baker value chain (1 to 6).

Think that baker and butter was not too good an example - their value chains are too complex. A hunter and a gatherer would be better, probably.

Expansion:
7. Baker uses sale proceeds to buy cow.
8. Baker uses milk from cow to make butter.
9. Baker now sells both bread and butter.
10. Baker puts former butter maker out of business.
11. Total GDP does not change. But individual businesses rose and fell.

No way. No buys/sells. And he will not have time. It will be the other way round - each will be doing both bread and butter until they meet each other, and then they will specialize and total GDP should increase.

[radon1]

They are each better off because instead of a surplus they have something they did not have before, they traded their profit (surplus) for something of value.

Absolutely. The only qualifier - is that they did have this "something" before, because the staticism of the system pre-supposes that the system has been in this state over a long-term (essentially, over infinity, for the modeling purposes) and settled for equilibrium.

At the stage where they first met each other and started their exchange they could actually make some "profit" for a while, until they settled for equilibrium. And their living standards rose, as a result.

A bit stupid to quote oneself, but just wanted to mention that in very simplistic terms, the stage from their first encounter to the state of equilibrium in their trade/exchange, as described in the last paragraph, would be a "capitalism" stage of sorts.

[Pops]

But behind the veneer and semantics, how much do you guys actually disagree with the meat and potatoes of a no growth economic system?

I'd question you back kub, do you believe there is a possibility of a voluntary no-growth system?

The eternal undercurrent at PO.com has always been the sorta evilness of the human race, it's stupidity, greed etcetera. My "belief" on that question is not that we are inherently evil (Eve was a Babe and Adam just did what came natural) but that we have simply adapted our specific skills way to fast to know when to stop. I'm certain we have the capability and even the moral fibre to stop growth tomorrow, reverse CO2 and whatever other GHG emissions, pollutants in general, overpopulation and all the rest if we simply were to become convinced it was an existential crisis.

I'm also pretty sure we will not see that happen any time soon. I see lots of monster shouting but very few threads talking about drastic measures taken on an individual - any individual - level.

[ralfy]

Actually, growth in capitalism means earning more money.

Where do you come up with these rules, LOL

Buffet has accumulated several hundred billions, is that how the growth of the economy is measured?

No, it is measured by the gross product, the total amount produced.

It's not so much rules as empirical data, unless one can argue that the global economy during the past few decades was not capitalist. During that period, money supply and energy and resource use increased globally.

Here's a definition of GDP:

https://en.wikipedia.org/wiki/Gross_domestic_product

The money spent for the various components of GDP come from those "several hundred billions."

[kublikhan]

I'd question you back kub, do you believe there is a possibility of a voluntary no-growth system?

Of course. It's what existed for thousands of years before capitalism so thousands of years of history proving that it is indeed possible. Though perhaps I should say very low growth as even back then there was still low levels of growth from population increases and/or productivity improvements.

The eternal undercurrent at PO.com has always been the sorta evilness of the human race, it's stupidity, greed etcetera. My "belief" on that question is not that we are inherently evil (Eve was a Babe and Adam just did what came natural) but that we have simply adapted our specific skills way to fast to know when to stop. I'm certain we have the capability and even the moral fibre to stop growth tomorrow, reverse CO2 and whatever other GHG emissions, pollutants in general, overpopulation and all the rest if we simply were to become convinced it was an existential crisis.

Such trends already seem to be brewing in much of the developed world. Japan's decades of stagnant GDP and shrinking population speak to that. Europe appears at risk of heading down a similar path. Although it this case it is more a case of chickens coming home to roost than our moral fiber at work. Perhaps all this talk of the "New Normal" is just the next stage of an economic transition towards a no or very low growth economy.

[ralfy]

Ralfy, you make something and I make something

We trade

We consume

What is left?

Nothing.

That's a barter system, not capitalism.

Finally, from what I remember, profits are not used for depreciation. Rather, profits are what remains when expenses (which includes depreciation) are deducted from revenues:

It is funny, I think I first read the term Gish Gallop was in a post of yours. But that seems to have become your style. You make a point to disagree with every statement I make even when your argument agrees with my statement.

I said "When "invest" profit in a productive asset.. it [depreciates] "

You argue: "profits are not used for depreciation. Rather, profits are [reduced] by depreciation"

LOL, I assume you have no actual arguments left.

A product doesn't depreciate when you invest in it. It depreciates when you use it.

When you deal with depreciation by replacing a product or repair it, you're not investing in it. You're maintaining it.

Profit is the difference between revenues and expenses. Profit is not revenues.

Revenues is what is used to pay for depreciation, not profit. That's because profit is what remains after revenues are used to pay for expenses, and that includes depreciation.

To recap, I think it's

revenues minus expenses equals net profit (or loss)

for the income statement. For the balance sheet, there's retained earnings, etc.

[ralfy]

Pops, you still don't get it. There is no profit in a closed non-growing system..

If I produce a surplus of something, whatever, that surplus is profit.

That surplus is the source of growth. But if you're not talking about money, then what you described is not a capitalist system. You will find more details in my previous posts.

Capitalism requires laws that protect private property, private profit and prevent monopolies from forming. Prior to the 1700 those were not all that common. Additionally, technological advance really got going around 1700 and of course fossil fuels were an accelerant, sorta speak.

Actually, there are different types of capitalist systems, and not all of them protect or prevent these characteristics. In some cases, they even involve lack of laws which lead to phenomena similar to monopolies.

The last point may also support what I said earlier, about capitalism going beyond labor.

[ralfy]

What was demonstrated in the baker example is if 2 people can each produce a surplus they can trade their surplus.

They are each better off because instead of a surplus they have something they did not have before, they traded their profit (surplus) for something of value.

I think that's a barter system with more produce created.

A capitalist system, on the other hand, involves surplus invested to produce a greater surplus. There are different reasons why that is desirable, and one is competition. Another is to pay for interest on a loan needed to buy the equipment, etc., to produce.

Again, the definition of capitalism and its various characteristics were explained to you in previous messages. You have to go beyond the definition of capitalism as simply private property and profit, as that is clearly lacking.

[ralfy]

[Last thing that capitalism requires - is to prevent monopolies from forming.

Actually that and private property are probably the only thing it requires.

As explained to you several times, capitalism involves more than private property and profit. Rather, it involves capital accumulation, or profit used for spending and investment. Both involve more production and consumption, which in turn leads to more profits, which are used for more spending and investment, etc.

That's why the current global capitalist system involves decades of increasing credit and energy and material resource use.

[ralfy]

I think semantics is a big part, Kub. But as well is the belief that capitalism is bad. That i the entertaining part of the discussion.

If you ask Pete and Ralfy I think they would say capitalism is the mother of all evils and it's destruction is an existential priority, hece their unwavering belief that it will.

I think it is the mother of both. That is, it led to lower infant mortality rates, higher life expectancy rates, and greater access to both needs and wants, which is good. However, it has also led to incredible levels of inequality, environmental damage and global warming, the threat of a resource crunch, overpopulation, etc.

In many ways, one realizes that capitalism is a victim of its own success, and that it will fall apart not because its critics believe so but because combinations of crises that it created (peak oil, global warming with environmental damage, and increasing debt coupled with fallout from financial risk-taking) will overwhelm it.

Or, to put it simply, a system that requires continuous economic growth cannot be sustained in a world with physical limitations.

Finally, if there is any desire to see it collapse right away, it is likely based on the argument that the crises created by capitalist systems outweigh benefits.