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Are subsidies always bad?

Discussions about the economic and financial ramifications of PEAK OIL

Re: Are subsidies always bad?

Unread postby Dreamtwister » Sun 31 Aug 2008, 14:02:46

Quinny wrote:There seems to be a general acceptance that the market rules on this thread. IMHO this is absolute b******* . It's a good servnt but a terrible master, look where it's got us!!!


You seem to be labouring under the misconception that what we currently have in any way resembles a free market. In a free market, Freddie, Fannie, GM, Ford, American Airlines and countless banks would have folded by now. It is only through massive government subsidies in the form of bailouts that have kept any of these companies aloft.

And therein lies the incidiousness of fiat currencies. Even if you own your home outright, never drive, never fly and keep all of your money under your mattress, if you use federal reserve notes, you're still paying to perpetuate the system.
The whole of human history is a refutation by experiment of the concept of "moral world order". - Friedrich Nietzsche
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Re: Are subsidies always bad?

Unread postby Quinny » Sun 31 Aug 2008, 14:27:05

No misconception, coming from the UK where the priveliged few rule because of historical circumstances one couldn't think that way.

Most here seem to slavishly assume that the free market would deliver if given the chance. I don't believe that to be true.

Collective provision just makes economic sense for some services and products.


Dreamtwister wrote:
Quinny wrote:There seems to be a general acceptance that the market rules on this thread. IMHO this is absolute b******* . It's a good servnt but a terrible master, look where it's got us!!!


You seem to be labouring under the misconception that what we currently have in any way resembles a free market. In a free market, Freddie, Fannie, GM, Ford, American Airlines and countless banks would have folded by now. It is only through massive government subsidies in the form of bailouts that have kept any of these companies aloft.

And therein lies the incidiousness of fiat currencies. Even if you own your home outright, never drive, never fly and keep all of your money under your mattress, if you use federal reserve notes, you're still paying to perpetuate the system.
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Re: Are subsidies always bad?

Unread postby cube » Sun 31 Aug 2008, 15:47:17

Dreamtwister wrote:...
Even education is a risky investment. When the population is well-educated, not only are they a threat to the government, they think of themselves as too good to swing a mop for minimum wage. Somebody has to shovel the crap, or society doesn't work.
+1
I am SO glad you mentioned this.

If we take an honest look at the economy we have to admit that maybe only 10% of the jobs out there truly requires a college education. So why are we trying to push everybody through college?
It makes no sense. What a waste of tax payers money. That's another example of a subsidy gone bad.
Whenever I tell anyone I think we are spending too much money on college education they give me an absolutely horrified look.
After I explain my reasoning they are forced to admit I have a very good point but yet they still think we should keep on shoveling more money into producing more college graduates. :roll:
//
some statistics to chew on
(doctors + lawyers + engineers) make up about only 1.1% of the US population.
Furthermore a lot of the people out there with the title "engineer" aren't really engineers if you know what I mean. *major eye rolls*
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Re: Are subsidies always bad?

Unread postby Starvid » Sun 31 Aug 2008, 16:13:08

When subsidies internalise external costs they make the market work more efficiently. Economics 101.
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Re: Are subsidies always bad?

Unread postby Starvid » Sun 31 Aug 2008, 16:15:27

cube wrote:Furthermore a lot of the people out there with the title "engineer" aren't really engineers if you know what I mean. *major eye rolls*

I don't. Could you please clarify?

*Studying to become an engineer*
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Re: Are subsidies always bad?

Unread postby cube » Sun 31 Aug 2008, 16:32:33

Starvid wrote:When subsidies internalise external costs they make the market work more efficiently. Economics 101.
Give an example please.
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Re: Are subsidies always bad?

Unread postby cube » Sun 31 Aug 2008, 16:46:15

Starvid wrote:
cube wrote:Furthermore a lot of the people out there with the title "engineer" aren't really engineers if you know what I mean. *major eye rolls*

I don't. Could you please clarify?

*Studying to become an engineer*
In the USA the job title "engineer" gets passed around rather loosely.
There are lots of people who are called engineers but are NOT really engineers.
It's kind of an American joke.

Of course real engineering is a very demanding and respectable profession. To put it bluntly most people just aren't cut out to become engineers. Because it is a difficult position to achieve it has a high status therefore many human resource departments at corporations will give employees the title of "engineer" just to make them feel good about themselves.
For example a person who is really only a technician might be given the title engineer.
// addon
This is most common in the software / computer industry because the line between technician and engineer is somewhat hard to define.
However this is not the case in civil engineering because of standardized testing so there is an absolutely clear distinction between technician vs engineer.
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Re: Are subsidies always bad?

Unread postby Starvid » Sun 31 Aug 2008, 18:00:15

cube wrote:
Starvid wrote:When subsidies internalise external costs they make the market work more efficiently. Economics 101.
Give an example please.

Imagine for example a company emits polluted water into a lake. This kills the fish hurting the livelihood of the fishermen. In effect the company is taking an internal cost and forcing it unto an external actor. Then the state should take action by penalising the company and transfering the penalty money to the fishermen.

This will make pollution less profitable for the company which will install filters or some such. It will no longer be able to pushing its costs unto others.
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Re: Are subsidies always bad?

Unread postby Starvid » Sun 31 Aug 2008, 18:12:25

cube wrote:
Starvid wrote:
cube wrote:Furthermore a lot of the people out there with the title "engineer" aren't really engineers if you know what I mean. *major eye rolls*

I don't. Could you please clarify?

*Studying to become an engineer*
In the USA the job title "engineer" gets passed around rather loosely.
There are lots of people who are called engineers but are NOT really engineers.
It's kind of an American joke.

Of course real engineering is a very demanding and respectable profession. To put it bluntly most people just aren't cut out to become engineers. Because it is a difficult position to achieve it has a high status therefore many human resource departments at corporations will give employees the title of "engineer" just to make them feel good about themselves.
For example a person who is really only a technician might be given the title engineer.
// addon
This is most common in the software / computer industry because the line between technician and engineer is somewhat hard to define.
However this is not the case in civil engineering because of standardized testing so there is an absolutely clear distinction between technician vs engineer.

I see.

Over here "Engineer" is a protected title. Calling yourself that while not being it is a crime. You get the title after getting your engineering degree which used to take 4,5 years in university but has now been changed to 5 years because of the Bologna reforms. I've studied political science and economics and stuff and just decided to switch over to engineering so I have 5 years of freakish math in front of me. Gah. I must say those other things felt like a cakewalk compared to this.

Oh well, in 5 years you can call me Mr. Master in Energy Systems Engineering. :wink:

PS. On a side note, engineer is formally called "civil engineer" in Sweden, while what the anglosaxon world calls a civil engineer we call a "(civil) engineer in road and water construction".
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Re: Are subsidies always bad?

Unread postby TommyJefferson » Mon 01 Sep 2008, 09:09:34

Starvid wrote:When subsidies internalise external costs they make the market work more efficiently. Economics 101.


Wrong.

Go learn economics.
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Re: Are subsidies always bad?

Unread postby Alcassin » Mon 01 Sep 2008, 09:37:08

TommyJefferson wrote:Wrong.

Go learn economics.


There is more schools of economics not only Austrian school.
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Re: Are subsidies always bad?

Unread postby Starvid » Mon 01 Sep 2008, 11:16:45

TommyJefferson wrote:
Starvid wrote:When subsidies internalise external costs they make the market work more efficiently. Economics 101.


Wrong.

Go learn economics.
Try figuring out what an external and an internal cost are.

Or maybe you think the free rider problem doesn't exist?
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Re: Are subsidies always bad?

Unread postby TommyJefferson » Mon 01 Sep 2008, 22:20:41

The price discovery mechanism is the same regardless of school.

Subsidy is not most efficient.
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Re: Are subsidies always bad?

Unread postby Fiddlerdave » Mon 01 Sep 2008, 23:47:44

Dreamtwister wrote:I like the milk example.

Let's pretend that the actual retail price of milk is $4.00. Pretty discouraging, isn't it?

Well since the government heavily subsidizes milk, grocery stores are able to put up a much more comfortable sticker price of $2.00. The price to the consumer appears cheaper, doesn't it? Well it's not, because the government had to cough up the extra $2 from it's own revenues, either directly from taxes, or indirectly through inflation.

But even worse, is that everybody chips in for that extra $2, even if they never drink any milk. Where's the "Didn't drink any milk this year" deduction on my tax form?

And finally, subsidies are anti-small business. Huge agribusinesses like ADM, Cargill and Monsanto are capable of operating on less profit-per-unit because they have scale. Joe the farmer can not. So Joe the farmer gets pushed out of business, which he then has to sell to...you guessed it...ADM, Cargill and Monsanto.

But the situation is even uglier than all that!

What if the government of Guadalawhothehellcares decides to subsidize it's farmers to the tune of $3? You know someone is eventually going to find a way to profit from loading that surplus milk onto a plane and flying it to markets half-way around the world. Don't laugh. At my neighborhood supermarket, I can buy tomatos from Spain for less than those grown locally.

Even education is a risky investment. When the population is well-educated, not only are they a threat to the government, they think of themselves as too good to swing a mop for minimum wage. Somebody has to shovel the crap, or society doesn't work.
Always amazing to see this kind of complete cluelessness on how so many goverment subsidies work from the viewpoint of the pseudo-"Free Market" propagandists.

The government in the USA DOES NOT subsidize milk prices to consumers, it subsidizes milk prices to DAIRY FARMERS. It does this by using TAXPAYER MONEY to BUY HUGE AMOUNTS OF MILK AND MILK PRODUCTS to prop the price up to what the dairy lobby has determined to be the profit level they would like. Further, the farm lobby rides the government hard to dispose of this milk in a way that will not cost them any sales in domestic and foreign markets by rich or poor alike. Much of these products are simply dumped and wasted, sometimes at sea. At one point, some was given away to the poor and elderly, but the farm lobby stopped it -it "cost them sales" of their inflated-price products!

Where's the "I am not a profitable owner of a subsidized huge farm corporation" rebate box on my tax form?

The author is correct in stating that "subsidies are anti-small business". Many of the subsidies go straight to the mega-businesses, who not only have economy of scale, but a good piece of 100 billion subsidy passed like clockwork by the Congress.

Indeed, "Somebody has to shovel the crap, or [s]society[/s] big business doesn't [s]work[/s] get its subsidies", but its the individual taxpayer who gets it in BOTH ends in this example. The tax money spent means the consumer pays DOUBLE for the inflated prices of the farm products.



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Re: Are subsidies always bad?

Unread postby Alcassin » Tue 02 Sep 2008, 00:24:27

TommyJefferson wrote:The price discovery mechanism is the same regardless of school.


Correct, but it's neutral, nor good neither bad.

Subsidy is not most efficient.


Poverty is not most efficient state of social condition.
The least poverty is in welfare states.
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Re: Are subsidies always bad?

Unread postby Starvid » Tue 02 Sep 2008, 11:04:01

Alcassin wrote:
TommyJefferson wrote:The price discovery mechanism is the same regardless of school.


Correct, but it's neutral, nor good neither bad.

Subsidy is not most efficient.


Poverty is not most efficient state of social condition.
The least poverty is in welfare states.

Which has nothing to do with the discussion here.

Subsidies and penalties can be used and are used to make the market work more efficiently. For example when someone is essentially profiting from stealing a little from everyone, like polluting the commons. Is this hard to understand?
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Re: Are subsidies always bad?

Unread postby TommyJefferson » Tue 02 Sep 2008, 11:15:05

Starvid wrote:Subsidies and penalties can be used and are used to make the market work more efficiently.


No they cannot, as has been said again, and again in this thread.

Subsidies and penalties short-circuit the price discovery mechanism. This invariably creates inefficiencies.

I don't know how this could be explained to you any more simply.
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Re: Are subsidies always bad?

Unread postby TommyJefferson » Tue 02 Sep 2008, 13:36:00

Alcassin wrote:The least poverty is in welfare states.


Hahhaha.

Yeah, they have so little poverty in China, Cuba, North Korea, Venezuela, and Somolia compared to less socialistic countries.

Oh how I pine for the days when socialism wiped out poverty in Cambodia, the USSR, and Africa. Yes, those were blessed enclaves of intellectual happiness and full bellies.
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Re: Are subsidies always bad?

Unread postby Alcassin » Tue 02 Sep 2008, 14:27:32

Compare Sweden, Norway, Denmark, Iceland to any other country.
They are welfare states.

Oh yeah, you are always cherry-picking, standard tactic TJ.
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Re: Are subsidies always bad?

Unread postby Quinny » Tue 02 Sep 2008, 15:50:17

TommyJefferson wrote:
Starvid wrote:Subsidies and penalties can be used and are used to make the market work more efficiently.


No they cannot, as has been said again, and again in this thread.

Subsidies and penalties short-circuit the price discovery mechanism. This invariably creates inefficiencies.

I don't know how this could be explained to you any more simply.


Said by who?

You?
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