Is socialism solid in theory? No, I don't think so

More Than Mortal · May 13, 2015, 01:55:21 PM

I wouldn't go insofar as to say this represents the views of Verbatim, but his somewhat socialist/communist ideas and talk of theory set me off. The following formulation is my own, but it's certainly not original to me; I have seen it espoused in various forms beforehand.

So, why is the market most efficient? As opposed to some sort of central planner (which it looks like Verbatim would prefer) which is omniscient and benevolent.

Socialists tend to argue that a thing's value is derived from its labour, and thus W=APL. Or, that real wages ought to equal the average product of labour. Or, essentially, labour divided equally. It underlies most charges of exploitation under capitalism, and can be seen creeping into criticisms of the supply-demand price mechanism.

However, even if you assume a benevolent social planner with complete information you still end up with:
W=MPL (real wages = marginal product of labour).
R=MPK (real interest rates = marginal product of capital).
MU1/MU2=MC1/MC2 (marginal utility = marginal cost).

A market in Walrasian equilibrium is simply much more efficient, even when you have a social planner involved. Even if you desired a certain level of equality in your society, the social planner would simply tinker with the capital stock and let the market reach Pareto efficiency by itself, not throw the baby out with the bathwater.

Most socialists see a divergence between P and MSC (or the price and marginal social cost, implying a negative distortion), however the solution to this is not to do away with the supply-demand price mechanism. The solution is to tweak the price mechanism, probably with a tax, to make sure P=MSC.

Accordingly, you end up with MU1/MU2 = P1/P2 = MC1/MC2, which means the economy has a fully equalising utility-cost ratio as well as the so despised price mechanism.

So yeah, socialism doesn't have theory on its side.

challengerX · May 13, 2015, 01:58:18 PM

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maverick · May 13, 2015, 02:01:55 PM

I didn't comprehend half of what you said but I agree, I think.

Mordo · May 13, 2015, 02:15:11 PM

Will Hunting stop posting pls

Verbatim · May 13, 2015, 02:30:04 PM

I guess all my socioeconomic posts will go in this thread now.

BRB as I educate myself on some of those choice terms.

I'll try not to spam this thread with Cameron Watt videos...

More Than Mortal · May 13, 2015, 02:35:28 PM

Quote from: Verbatim on May 13, 2015, 02:30:04 PM

I'll try not to spam this thread with Cameron Watt videos...

Oh God his videos make me fucking cringe.

King pesto · May 13, 2015, 03:47:51 PM

This is the first time Meta has posted about economics and I've understood what he's saying

Am I learning

big dog · May 13, 2015, 04:43:06 PM

Uhhhh e=mc^2?

Saleem · May 13, 2015, 08:30:09 PM

Yeah I don't know economics.

Magos Domina · May 13, 2015, 09:38:45 PM

>meta shitposting in serious again

Naru · May 14, 2015, 03:06:50 AM

What the fuck did i just read

Jester · May 14, 2015, 08:15:29 AM

What is this thread

Turkey · May 14, 2015, 09:43:14 AM

There are like four people on this site that know what you're talking about.

God · May 14, 2015, 11:30:02 AM

So in other words Meta=right and Verby=wrong. Got it.

Korra · May 14, 2015, 09:05:13 PM

You are blowing my mind, Mets!

Not Comms Officer · May 14, 2015, 11:18:32 PM

Well, I imagine that most people here don't support pure socialism. I'll acknowledge that there has to be some degree of a market system, but I just think that it should be regulated, since Capitalism is reliant on exploitation. So adding some socialist aspects to it could help alleviate the negative effects on the exploitation.

ΚΑΤΑΝΑΛΩΤΗΣ · May 14, 2015, 11:24:18 PM

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Not Comms Officer · May 14, 2015, 11:26:33 PM

Quote from: Door on May 14, 2015, 11:24:18 PM

Quote from: Not Comms Officer on May 14, 2015, 11:18:32 PM
Well, I imagine that most people here don't support pure socialism. I'll acknowledge that there has to be some degree of a market system, but I just think that it should be regulated, since Capitalism is reliant on exploitation. So adding some socialist aspects to it could help alleviate the negative effects on the exploitation.
it's literally only exploitation if you consider value to be derived from labor, which is retarded

I was talking about how many people are underpaid for the work they do to give the people running the company a profit. That's how it works. If you paid everyone what they deserve, then the entire system would collapse.

More Than Mortal · May 15, 2015, 02:12:46 AM

Quote from: Not Comms Officer on May 14, 2015, 11:26:33 PM

If you paid everyone what they deserve, then the entire system would collapse.

What?

Not Comms Officer · May 15, 2015, 02:21:47 AM

Quote from: Meta Cognition on May 15, 2015, 02:12:46 AM

Quote from: Not Comms Officer on May 14, 2015, 11:26:33 PM
If you paid everyone what they deserve, then the entire system would collapse.
What?

I'm referring to the scenario in which you paid the working underclass the wage that they would deserve for hard work, then many companies wouldn't be able to turn a profit, and they would stagnate. So then that stagnation translates to wider economic stagnation.

More Than Mortal · May 15, 2015, 02:23:01 AM

Quote from: Not Comms Officer on May 15, 2015, 02:21:47 AM

I'm referring to the scenario in which you paid the working underclass the wage that they would deserve for hard work

How hard you work doesn't determine your wage, and nor should it.

The marginal value of your labour does.

Not Comms Officer · May 15, 2015, 02:25:21 AM

Quote from: Meta Cognition on May 15, 2015, 02:23:01 AM

Quote from: Not Comms Officer on May 15, 2015, 02:21:47 AM
I'm referring to the scenario in which you paid the working underclass the wage that they would deserve for hard work
How hard you work doesn't determine your wage, and nor should it.

The marginal value of your labour does.

And the marginal value is set slightly lower than what it would normally be so companies can make profit. That's more the point I'm getting across.

More Than Mortal · May 15, 2015, 02:30:36 AM

Quote from: Not Comms Officer on May 15, 2015, 02:25:21 AM

And the marginal value is set slightly lower than what it would normally be so companies can make profit.

I don't see why they'd need to do that; they could just employ less people. Considering labour is literally the facilitation of value for a firm, it wouldn't really make sense for them to try and depress wages to line their pockets further. First of all because wages are already depressed by things like corporate income tax, and secondly because it wouldn't go well for them to have a competitor role up and offer higher wages.

Not Comms Officer · May 15, 2015, 02:33:42 AM

Quote from: Meta Cognition on May 15, 2015, 02:30:36 AM

Quote from: Not Comms Officer on May 15, 2015, 02:25:21 AM
And the marginal value is set slightly lower than what it would normally be so companies can make profit.
I don't see why they'd need to do that; they could just employ less people. Considering labour is literally the facilitation of value for a firm, it wouldn't really make sense for them to try and depress wages to line their pockets further. First of all because wages are already depressed by things like corporate income tax, and secondly because it wouldn't go well for them to have a competitor role up and offer higher wages.

Or those two competitors could make a secret agreement for both of them to lower wages jointly. It's not unheard of where stuff like that happens. It's a win-win agreement in their eyes: they both get more money in their pockets, and they don't have to worry about competition from the other party. So it's not unreasonable to assume that such a thing isn't beyond them.

More Than Mortal · May 15, 2015, 02:42:09 AM

Quote from: Not Comms Officer on May 15, 2015, 02:33:42 AM

Or those two competitors could make a secret agreement for both of them to lower wages jointly. It's not unheard of where stuff like that happens. It's a win-win agreement in their eyes: they both get more money in their pockets, and they don't have to worry about competition from the other party. So it's not unreasonable to assume that such a thing isn't beyond them.

Oh yeah, that happens. "Cartels", they're called and I think there were a couple knocking around in Silicon Valley not too long ago to stop the firms from stealing each other's engineers.

But, yeah, being pro-free market isn't the same as being pro-business. I want a relatively free market so all of the pricing mechanisms and exchanges of goods, services and information are as efficient and beneficial as possible. There certainly are businesses who try and play the system, such as through cartelisation, and the government should spare none of its wrath in punishing these businesses.

Not Comms Officer · May 15, 2015, 02:46:41 AM

Quote from: Meta Cognition on May 15, 2015, 02:42:09 AM

Quote from: Not Comms Officer on May 15, 2015, 02:33:42 AM
Or those two competitors could make a secret agreement for both of them to lower wages jointly. It's not unheard of where stuff like that happens. It's a win-win agreement in their eyes: they both get more money in their pockets, and they don't have to worry about competition from the other party. So it's not unreasonable to assume that such a thing isn't beyond them.
Oh yeah, that happens. "Cartels", they're called and I think there were a couple knocking around in Silicon Valley not too long ago to stop the firms from stealing each other's engineers.

But, yeah, being pro-free market isn't the same as being pro-business. I want a relatively free market so all of the pricing mechanisms and exchanges of goods, services and information are as efficient and beneficial as possible. There certainly are businesses who try and play the system, such as through cartelisation, and the government should spare none of its wrath in punishing these businesses.

I'm not really familiar with how much "cartel" businesses here in the US are punished/regulated by the Government, since businesses are generally far more influential in politics in the US than in Europe. Not sure how it is in the UK though.

But I'm doubtful that they'd be regulated nearly as much as they should be here.

More Than Mortal · May 15, 2015, 02:55:49 AM

Quote from: Not Comms Officer on May 15, 2015, 02:46:41 AM

I'm not really familiar with how much "cartel" businesses here in the US are punished/regulated by the Government

Probably not enough.

Significant fines are probably the best way too go.