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Are subsidies always bad?

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Re: Are subsidies always bad?

Unread postby Quinny » Fri 05 Sep 2008, 23:38:40

cube wrote:to: Quinny

I'm getting annoyed with your ridiculous antics of dropping subtle clues and crying "OMG you're misrepresenting my position."
Why don't you explain yourself.
You can start by saying, "I think Europe is better positioned to handle PO then the USA because......."


what makes you think i would say something like that?
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Re: Are subsidies always bad?

Unread postby Quinny » Fri 05 Sep 2008, 23:46:25

nice to see someone reads the title of the thread.

good : helps sustain human life

bad : helps sustain human life


MrBill wrote:Q. Are subsidies always bad?

A. Bad (or good) are subjective values.

Subsidies encourage one set of behavior, while discouraging another (or an opposite behavior). What those subsidies encourage (versus discourage) can only be judged good (or bad) depending on what benefits society the most as those subsidies do not materialize out of thin air but are paid for by someone.

If subsidies encourage conservation of some limited resource (say oil) by encouraging the (early) switch to sustainable alternatives then that may well bring accelerated benefits to society. If not then it is simply a tax on consumption (or production) with the revenues spent elsewhere (say social programs of dubious economic value).

There is always a trade-off between the short-term and the long-term as well as the individual versus society. Therefore, again, good versus bad are subjective values.
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Re: Are subsidies always bad?

Unread postby Quinny » Sat 06 Sep 2008, 00:57:13

so 'capitalism is creative employment!' in your words. so at least you accept that human labour is the source of all wealth.

mmm....

so when you wouldn't answer me when i asked where i should go to 'learn economics' was it because you didn't want to say 'das kapital'.

TommyJefferson wrote:
Quinny wrote:We seem to keep having the mantra of 'Learn Economics' pushed down our throats, by supporters of what you describe as true market capitalism, when it's obvious to most that it's that system which has lead to the sorry mess the world is in today.


You blame capitalism for "the sorry mess". Capitalism is creative employment of wealth to produce things people want like health care, food, shelter, and sanitation. Socialism is the destructive theft and forced redistrubution of wealth created by capitalism.

You don't even realize that your wonderful socialism would have NO wealth to seize and spend on war and authoritarian slavery if it were not for capitalism.

Your ignorance of reality would be cute if it didn't promote the violence of government socialism.
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Re: Are subsidies always bad?

Unread postby cube » Sat 06 Sep 2008, 02:46:07

Quinny wrote:
cube wrote:to: Quinny

I'm getting annoyed with your ridiculous antics of dropping subtle clues and crying "OMG you're misrepresenting my position."
Why don't you explain yourself.
You can start by saying, "I think Europe is better positioned to handle PO then the USA because......."


what makes you think i would say something like that?
Never mind.
You're just here to waste people's time.

*ignore button*
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Re: Are subsidies always bad?

Unread postby BlueGhostNo2 » Sat 06 Sep 2008, 14:38:04

TommyJefferson wrote:
BlueGhostNo2 wrote:The problem is a 'free market' is not an efficient market.


Sweet Jebus on a stick.

Go learn economics.


Something wrong?

My statement 'A free market is not an efficient market' is true.
Your statement, is simply not part of a logical debate so shut the hell up or refute me with some facts I can argue with?

'Free markets' by which I mean a market with little regulation other than property rights, often create monopolies, monopolies are generally inefficient.
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Re: Are subsidies always bad?

Unread postby cube » Sat 06 Sep 2008, 15:16:18

BlueGhostNo2 wrote:...
'Free markets' by which I mean a market with little regulation other than property rights, often create monopolies, monopolies are generally inefficient.
If that's the only "issue" you have with the free market then by gosh you must be one of the most die-hard supporters of the free-market! 8)

Just write a law that says, monopolies are illegal and wham bam just like that.
We can all go home, wash our hands, and stop having a debate because EVERYBODY is perfectly happy now!
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Re: Are subsidies always bad?

Unread postby BlueGhostNo2 » Sat 06 Sep 2008, 15:41:46

Well cube I have learned that when debating with all stripes of fundamentalist it's easiest to simplify the debate to the crux of the argument, give them wriggle room and they will straw man some barely relevant paragraph and ignore your main points.

I do have other problems with unregulated markets. Bustin' a cap in your competition - also an inefficient distortion of the market :)
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Re: Are subsidies always bad?

Unread postby cube » Sat 06 Sep 2008, 16:04:23

BlueGhostNo2 wrote:Well cube I have learned that when debating with all stripes of fundamentalist it's easiest to simplify the debate to the crux of the argument, give them wriggle room and they will straw man some barely relevant paragraph and ignore your main points.
*delicate cough*
your main points were so ridiculous I didn't think you seriously wanted someone to address them but if you insist.

*digging up what you said*
Your main points:
1) outlaw emotive advertising,
2) outlaw large companies subsidizing their own entry into a new market.
3) outlaw selling at a loss.

my reply
1) good luck
2) what's wrong with this?
3) If somebody is dumb enough to sell something at a loss I'm more than willing to purchase it at below cost. :-D
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Re: Are subsidies always bad?

Unread postby Quinny » Sat 06 Sep 2008, 18:30:24

I think you're wasting your time trying to debate with Cube and TJ.

Cube knows better than you what you are thinking and then tells you what it is?

TJ just tells you to learn economics, but won't explain where you should do so.

BlueGhostNo2 wrote:Well cube I have learned that when debating with all stripes of fundamentalist it's easiest to simplify the debate to the crux of the argument, give them wriggle room and they will straw man some barely relevant paragraph and ignore your main points.

I do have other problems with unregulated markets. Bustin' a cap in your competition - also an inefficient distortion of the market :)
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Re: Are subsidies always bad?

Unread postby BlueGhostNo2 » Sat 06 Sep 2008, 20:04:03

cube wrote:*digging up what you said*
Your main points:
1) outlaw emotive advertising,
2) outlaw large companies subsidizing their own entry into a new market.
3) outlaw selling at a loss.

my reply
1) good luck
2) what's wrong with this?
3) If somebody is dumb enough to sell something at a loss I'm more than willing to purchase it at below cost. :-D


1) Thanks :)

2) It allows a company which is very successful in one arena to use their profits to enter another arena and sell at a loss thus wiping out competition, I guess this a law is abit unecessary if you do 3 and 1 though so forget it. I'd like to see something to prevent companies getting big enough to strong arm governments though, it's dangerous.

3) This is the problem, everyone likes to buy cheap, but as a result we get loss leader products, we get 'not quite monopolies'. In the normal course of business it should never be necessary to sell below cost. But many successful companies do, clearly this shows the market is not working properly.

In a way you were right earlier - I am a market fundamentalist, BUT, an efficient market fundamentalist. Why do you believe "Free Markets" are the most efficient way of dividing resources? The world is rife with examples of where they fail and for a market to exist at all you need some regulation (property rights, anti-monopoly law, false advertising law etc)
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Re: Are subsidies always bad?

Unread postby cube » Sun 07 Sep 2008, 00:50:14

BlueGhostNo2 wrote:2) It allows a company which is very successful in one arena to use their profits to enter another arena and sell at a loss thus wiping out competition, I guess this a law is abit unecessary if you do 3 and 1 though so forget it. I'd like to see something to prevent companies getting big enough to strong arm governments though, it's dangerous.
It is my observation that being BIG is no guarantee for success. Take for example Microsoft. They are obviously trying to use the fortune they made off software to muscle their way into the video gaming business with their X-box console. They are selling their consoles at a loss and so is Sony. But guess what?
Nintendo is still kicking both their asses with the Wii.
I don't think being big gives someone a guarantee to expand into another business. What it does is allow a nice big pillow to act as a cushion in case a bad financial decision is made. That alone of course is a big advantage. But a continuous string of bad investments can bring down even the mightiest of empires. When a company becomes "too big to fail" --> they do!

BlueGhostNo2 wrote:3) This is the problem, everyone likes to buy cheap, but as a result we get loss leader products, we get 'not quite monopolies'. In the normal course of business it should never be necessary to sell below cost. But many successful companies do, clearly this shows the market is not working properly.
Companies sell for a loss for a variety of reasons.

1) The most infamous example would be ink jet printers.
They sell the printers for cheap but ohhh boy are those ink jet cartridges super expensive.

2) Suppose a truck driver in Nevada just got a super sweet deal to deliver a load from California to New York. (round trip double profits).
But he needs to get his booty over to California within 24 hours.
In this case the truck driver needs to move quickly so he may offer to deliver a load from Nevada to California at a loss. Hey it's better then riding empty (dead heading) right?

3) A large airline carrier may subsidize 1 particular route hoping to defeat a smaller rival that specializes in that 1 route. This may look like an example of a bully trying to muscle some other smaller rival out of business but in reality it's a Pyrrhic victory. Claiming victory by taking a loss is nothing to brag about. This tends to happen when the market is over-saturated and thus somebody must go down.

Why do you believe "Free Markets" are the most efficient way of dividing resources?
money losings mistakes are made every day in the "free-market". The beta-max tape, the segway, and look at all those crazy dot-com companies of yesterday. The free-market works because investors must eat their own losses for making bad mistakes. Can you imagine what this world would look like if EVERY bad business decision was offloaded onto the taxpayers!
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Re: Are subsidies always bad?

Unread postby BlueGhostNo2 » Sun 07 Sep 2008, 08:47:05

No cube, I can't imagine what bailouts for all would look like but it looks like the US of A will show us if they can :D

Yes, the fact capitalism works via survival of the fittest is not lost on me. MS and Sony entering the video game industry are a good examples of what I'm trying to show as indeed are ink jet printers.

Neither MS or Sony had any particular technological breakthrough to drive entry, they simply realized they had the resources to take a large slice of a growing pie from the incumbents.

They drove Sega out of business and until the DS and Wii were slaughtering nintendo. They could do this because they have deep pockets, however it does not really benefit the consumer, yes things are slightly cheaper or slightly more advanced technologically than they might otherwise be initially. But MS and Sony want to make that investment back, so in time the consumer has to pay.

We also have a company (sega) go bust for no real reason - jobs get lost, shareholders lose money. Sony and MS shareholders also lose as they could have had a large dividend and then bought a bigger share of the games industry pie.

The consumer loses, the shareholders lose the only people who win are those running MS and Sony who get a bigger empire. Good if it comes about through organic growth and proving they have better management, very bad if it comes through using your position in a large market to crush superior companies in a smaller market.

3) The trucker is not selling at below cost even if he's charging less than the route costs as he's going to have to make that drive anyway, it costs him ~ nothing to fill up the truck with goods.

Cheap Ink jet printers are a... market distortion! When I go to buy an inkjet printer I cannot accurately judge the cost of what I'm buying (goes doubly so for the free ones given away with retail bought PC's). To do so I need to know, how long I will own it, how much I will print and how much they will gouge me for the ink. So how does this help with the accurate pricing of goods and services? How does it help drive down the cost to the consumer? It doesn't, so why do you hold it up as example of the free market working?

I think we could also use legislation that prevents the use of 'closed standards' too, because every closed standard is the creation of a monopoly.

Understand I am not saying 'Markets are Bad' or companies should not go bust. I am saying markets need regulation to keep them efficient, people will always try and innovate ways of distorting the market into their favor be it by lobbying, lying, closed standards or killing off the other dealers. But it's not in societies interests to let this happen.
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Re: Are subsidies always bad?

Unread postby cube » Sun 07 Sep 2008, 11:52:00

BlueGhostNo2 wrote:...
Understand I am not saying 'Markets are Bad' or companies should not go bust. I am saying markets need regulation to keep them efficient, people will always try and innovate ways of distorting the market into their favor be it by lobbying, lying, closed standards or killing off the other dealers. But it's not in societies interests to let this happen.
I think this is where you and I disagree.
The business practices you mentioned which you have issues with, I consider them fair game.
It does not bother me that companies resort to such tactics.
I believe that no matter how big a company gets, it musts still deliver a superior product then the competition or eventually go bankrupt.
Sure it can use it's size to "muscle" it's way into someone else's turf with an inferior product and maybe even win.
However....
This is a sure fire road to ruin.

Maybe a bad example but lets compare this to military war.
The USA has defeated Iraq and "won". It's pretty easy to win a war when you're overspending the competition by a factor of over 100 to 1.
If the USA keeps on winning wars like this then it is doomed to collapse.
Whether nations, corporations, or single individuals.......NOTHING is so rich and powerful that it becomes to big to fail.
That is an ironclad rule.
And that is why the points that you mentioned don't bother me one bit.
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Re: Are subsidies always bad?

Unread postby Quinny » Sun 07 Sep 2008, 14:00:15

This is getting ridiculous. Kill millions, it doesn't matter because eventually you lose. How stupid can some people be!
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Re: Are subsidies always bad?

Unread postby BlueGhostNo2 » Sun 07 Sep 2008, 14:10:25

It's a bad example, the reason the US can lose the peace in Iraq is because they cannot possibly search out and confront every enemy. Their enemies can hide then pick their battles. The analogy breaks down quite rapidly.

I don't really get why you disagree, sure eventually all companies will go bust and in many cases the company with a new and better product wins. However, HUGE sums of money, vast amounts of resources are channeled into products like Coke.

Coca Cola makes a product which loses in blind taste surveys to Pepsi, but which wins when people know they're drinking coke, it costs more to produce because of the excellent branding and advertising that is part of the cost. SO, people who buy coke are paying for the marketing that persuades them to like it. Taken across the whole economy this amounts to HUGE amounts of effort wasted in pointless brainwashing arms races... Why would you not want to improve something so obviously and needlessly wasteful just to be true to some ideology?

Incidentally I'm curious to know what regulation you think is required to create the most efficient market? What defines the 'free market' position you favor? I presume property law features, does environmental law?
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Re: Are subsidies always bad?

Unread postby Quinny » Sun 07 Sep 2008, 18:05:57

Ever read 10X economics - Peter Donaldson (I think). He points out the effect of introducing 'floss' into an otherwise stable and healthy economy. The effect from an economic point of view can be entirely positive, but from a health/nutrition/environmental point of view it's a total disaster. The crazy thing is that the industries that are needed to sort out the problems of 'Floss' as they grow lead to an 'improving' economy!

The original question 'Are subsidies always bad?' clearly has only one answer whatever form of system you are living under. Anyone who thinks differently is not living in the real world.
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Re: Are subsidies always bad?

Unread postby BlueGhostNo2 » Sun 07 Sep 2008, 19:25:01

Quinny wrote:<snip>


For anyone interested in what Quinny is saying but with less time to web mine to understand than me: A cartoon about candy floss (aka cotton candy)
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Re: Are subsidies always bad?

Unread postby BlueGhostNo2 » Sun 07 Sep 2008, 19:31:26

Quinny the whole point of the 'floss' argument is that GDP does not necessarily measure things you care about. O.K. however this does not mean that GDP NEVER measures things you care about.

So your logic has nothing to do with subsidies.
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Re: Are subsidies always bad?

Unread postby cube » Mon 08 Sep 2008, 02:30:30

BlueGhostNo2 wrote:...
Incidentally I'm curious to know what regulation you think is required to create the most efficient market? What defines the 'free market' position you favor? I presume property law features, does environmental law?
After reading your posts there doesn't seem like there's that much difference between your position and mine.
however it's my observation...
The most common disagreement between FM free-market supporters and ME mixed economies seems to be what government is capable of doing. ME supporters believe that government can "stimulate" the economy while FM supporters believe that's impossible.
For example:

1) "seed money" argument
A nation may want to advance it's economy by encouraging the expansion of a certain industry say ship building.
Obviously that's not an industry that is easy to ramp up on it's own so the government may subsidize the industry.
A ME would say, "if we put in 'seed money' then the industry will grow and yield financial benefits many times over our original costs."
A FM supporter like say Margaret Thatcher might say, "There is nothing more permanent then a temporary government program."
I personally agree wholeheartedly.
I believe that anything that was created by a subsidy will almost definitely require that subsidy to continue its existence.
What's the FM solution? ---> Do nothing.
If the ship building industry cannot expand on it's own then that's the way things should be.
A subsidy does nothing but rob money from a healthy industry only to redirect it into a sick industry.

2) "revitalize" argument
A city's downtown district was once a vibrant center but is now on hard times. What should gov. do?
A ME supporter might say something absolutely ridiculous like, "lets build a light rail line to revitalize the downtown!"
A FM supporter would say *EVERYBODY NOW* --> "do nothing."
If something cannot survive on it's own then that means it should die-off.
The concept of expansion and collapse is just a normal part of the business cycle. Things go up and sometimes they go down.
If a business is going down that means society no longer has an interest in purchasing its goods or service and therefore government should respect that decision by NOT manipulating the market.

Those 2 points probably make up 75% of the disagreements between ME and FM supporters.
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Re: Are subsidies always bad?

Unread postby MrBill » Mon 08 Sep 2008, 03:14:46

Cube, although I agree with you on the technical points the Devil is in the details. For example, regenerating a downtown area is not simply up to investors per se as the infrastructure is a public good. Re-developing the Docklands in East London for the Olympics could not take place without not only public money, but also by re-zoning and other public actions such as decontaminating brownfields. However, once complete it will provide a public benefit as well as a private profit to investors in the surrounding areas. The goal is to make sure the overall benefit is larger than the direct subsidy. Given proper cost-benefit analysis it is crazy to say that a direct subsidy that yields 3X or 10X economic benefit should not be under taken.

As for ship building I have to disagree. Free trade is not fair trade. The notion of free trade is supposed to be based on comparative advantage. However, subsidies and currency manipulation distort competition. So if you happen to have a healthy, competitive ship building industry then a new competitor in a low-cost country that either unfairly subsidizes their ship building and/or manipulates their currency so that it is super competitive can destroy your own healthy industry without creating any value-added. A job destroyed in one country that creates no added-value is not a net gain. And if it is a lower paying job, with no benefits and comes with extra envrionmental damage then it is valued destroyed.

In my own opinion (who else's, right?) I believe that free trade economists are losing the battle, and it has profound implications for both developing and developed nations. Externalities like environmental destruction have to be taken into account in the price as well as the disposal and recycling of a good. A good that sells for $0.90 instead of $1.00 that destroys $0.20 in value-added including fully funded pensions as well as tougher environmental standards is no bargain at all. It is hypocritical to insist that labor be paid $20 an hour in one country, while similar goods are made in another using child labor that costs $0.20 per hour. Whatever benefits artificially accrue to consumers in the form of lower prices is lost in terms of hollowing out domestic manufacturing as well as contributing to environmental costs elsewhere.

I know well the arguments of free trade and comparative advantage and I see their short-comings in the real world as well. Free trade without fair trade does not generate real economic value. It transfers wealth from haves to have nots and in the process undermines the environmental and labor standards in developed countries, while not even ensuring that those workers in poorer countries reap the economic benefits of their labor. It is good to understand how economics works in theory, so that reality can be studied in the proper light. In other words you have to know the rules, so you know when it is appropriate to break them.
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