I suspect that I don't understand the economy

[Eileen]

I suspect that I don't understand the economy. I have these vague notions, which I think are my own opinions and not ones foisted upon me, but I don't have very cohesive arguments for or against economic viewpoints. I would like to hear some economic opinions that aren't necessarily meant to sway me but are reasoned and intelligent in any case.

Things that I kind of vaguely think, related to the economy:
-the idea that a free market is some kind of curative agent or stabilizer for a shitty economic environment is bullshit
-the idea that "wealth trickles down" also seems like bullshit to me, though to a smaller degree than the previous. It seems to me that it may, marginally, but that the majority of wealth stays right where it is (and that the rich stay rich and the poor stay poor)
-we (as a community--large or small) are responsible for our poor members, and this means that we should have social programs that help them pull themselves up... which I think really has to include some kind of educational/vocational component in addition to meeting housing/food needs
-taxes are good for funding social programs, though I think that there needs to be more frugality and less waste in government spending (it's just--I don't think that taking care of the poor is wasteful)
-outsourcing is bad
-a lack of "trade" education in public schools is bad for the economy
-a lowering of standards for college entrance and encouraging all students to go to college is both harmful to the educational system and to the economy


Now, I don't think that my opinions are ignorant--they're just vague and not part of a systematic understanding of the economy.

[The_Liquid_Laser]

I'll see if I can post more later, but I just want to put this quick thought in here.

The truth is that most people don't understand the economy including economists. There are several different prominent viewpoints on macroeconomics and these views often contradict each other. Generally most people agree on the majority of microeconomic principles and even some macroeconomic principles, but there is large disagreement about a lot of macroeconomics even by the experts.

So a lot of times, someone will try to convince you that one specific economic policy is the smart one and all the others are dumb, but they are only ascribing to one economic theory, and there are plenty of knowledgable people who will disagree.

[ajblaise]

Eileen, most economists agree with you. I don't even think "trickle down economics" is taken seriously in the field.

[Enyo]

You don't have it all wrong.

-the idea that a free market is some kind of curative agent or stabilizer for a shitty economic environment is bullshit

Mm, not so much. It follows a kind of natural flow. Things get far worse when government agencies to "help". Kind of like when a little kid helps you clean the house... sure, eventually, it will get right, but it takes far longer than it would have taken if you'd just been left the hell alone.

-the idea that "wealth trickles down" also seems like bullshit to me, though to a smaller degree than the previous. It seems to me that it may, marginally, but that the majority of wealth stays right where it is (and that the rich stay rich and the poor stay poor)

It's part of that "you have to spend money to make money" principle, combined with a disposable income thing. The money trickles down in the form of employment opportunities and increased disposable spending (which someone else profits from).

-we (as a community--large or small) are responsible for our poor members, and this means that we should have social programs that help them pull themselves up... which I think really has to include some kind of educational/vocational component in addition to meeting housing/food needs
-taxes are good for funding social programs, though I think that there needs to be more frugality and less waste in government spending (it's just--I don't think that taking care of the poor is wasteful)

As long as it's a hand UP and not a hand OUT, it's all good. But I'm not too keen on it when my tax dollars give food stamps to the lady who buys fillet mignon at the grocery store and is dripping in gold and Tommy Hilfigger. I used to see that when I worked at a grocery store in the 'hood, and it pissed me off to no end.

-a lack of "trade" education in public schools is bad for the economy
-a lowering of standards for college entrance and encouraging all students to go to college is both harmful to the educational system and to the economy

Agreed. A plumber and a mechanic is just as important as a doctor and a lawyer.

[ajblaise]

please ignore the nutty libertarians in this thread.

[Enyo]

Originally Posted by ajblaise

please ignore the nutty libertarians in this thread.

You know, you're welcome to disagree with someone, rather than cast aspersions on their sanity.

BTW, I *explained* the trickle-down principle. I didn't say it was an effective or great thing.

[Magic Poriferan]

Well, Eileen, you are sure to get a front seat view of what Liquid Laser was talking about.

[The_Liquid_Laser]

Ok let me give some of my ideas on some of these things.

Originally Posted by Eileen

Things that I kind of vaguely think, related to the economy:
-the idea that a free market is some kind of curative agent or stabilizer for a shitty economic environment is bullshit

For the majority of goods and services I think markets are awesome. It's true that command/communist economies really suck. However there are a few goods and services that markets don't handle very well. These are usually the goods and services that we hear discussed in political circles.

For example when a gallon of gas increases by $1, and the overall consumption drops by 1% that is an example of a free market in action. This isn't necessarily desirable though. In fact this is technically efficient according to the economic definition of efficiency. Most people don't want to see gas prices skyrocket while consumption stays basically the same, but that is what an efficient market does without outside intervention.

Overall I think markets are great, but in a few cases I like to see government intervention. For example if the government provided funding or subsidies for alternate fuel sources, then overall fuel supply would increase and that would keep fuel prices down.

-the idea that "wealth trickles down" also seems like bullshit to me, though to a smaller degree than the previous. It seems to me that it may, marginally, but that the majority of wealth stays right where it is (and that the rich stay rich and the poor stay poor)

No one believes in Trickle Down Theory as long as you call it "Trickle Down Theory". This has proven to be a bad idea, so people change the name and try to pass it off as something else. Ironically sometimes the same people will say "money tends to return to its rightful owner". I tend to agree more with this idea, and it is actually the exact opposite of Trickle Down Theory.

If you believe the second idea (which I do), then it makes more sense for the government to get involved and redistribute wealth in some way. The wealthy will get their money anyway, but the poor will get their hands on it long enough to buy necessary goods and services. The poor are better off while the wealthy are no worse off. (Btw this is essentially what efficiency means in an economic sense.)

-we (as a community--large or small) are responsible for our poor members, and this means that we should have social programs that help them pull themselves up... which I think really has to include some kind of educational/vocational component in addition to meeting housing/food needs

For the most part I agree with you, but I can also see the other side. It is true that the government is usually less effective than a business, so some will see this as a waste of money. On the other hand if these people don't get housing, food and education from somewhere they will tend to cause a lot of problems for society, so in general I think it is worth some tax dollars to have some program in place for them.

-taxes are good for funding social programs, though I think that there needs to be more frugality and less waste in government spending (it's just--I don't think that taking care of the poor is wasteful)

I agree, but the devil is in the details as they say.

-outsourcing is bad

I disagree. In the long haul workers will adapt to produce goods and services where we have the highest comparative advantage. (I.e. either we will make stuff that is good to trade, or stuff that is just as easy to buy at home than import.) In the long haul everyone benefits from free trade and specialization and outsourcing. I understand though that it can suck in the short term as workers have to learn new skills or get worse jobs or move or something else... waiting for the economy to adapt.

-a lack of "trade" education in public schools is bad for the economy
-a lowering of standards for college entrance and encouraging all students to go to college is both harmful to the educational system and to the economy

I probably don't know enough about these issues to comment on them.

[C.J.Woolf]

Eileen, I think economics is doomed to be hard to understand. An economy is a complex system like the weather, where everything affects everything else. Furthermore, I think we can never understand an economy in isolation from politics. People don't agree on a basic question like: What is an economy for? Your answer depends on your political views.

-the idea that a free market is some kind of curative agent or stabilizer for a shitty economic environment is bullshit

I agree. The free market is a good basis for an economy, but it is not a panacea and it must be regulated to be fair -- and to be most effective. Conservatives make the free market into a dogma. (Even the slightest tampering with the free market is BAD!!!)

-the idea that "wealth trickles down" also seems like bullshit to me, though to a smaller degree than the previous. It seems to me that it may, marginally, but that the majority of wealth stays right where it is (and that the rich stay rich and the poor stay poor)

Actually, it's greater bullshit than the previous. Paul Krugman wrote that Arthur Laffer's theory utterly failed peer review. Trickle-down economic policy was the result of a successful propaganda campaign in the editorial pages of The Wall Street Journal. George H.W. Bush called it "voodoo economics " until he lost the 1980 primaries and he drank the conservative kool-aid. Trickle-down theory was an excellent excuse for cutting taxes on the very rich, that's all.

The thing with trickle-down is that the very rich do not dispose of extra money the way the rest of us do. They might buy another house or a jet or give it to Harvard, but they save or invest the rest. Lower-income people tend to spend extra money, which in turn is spent. All that circulation is better for the economy overall.

Conservatives will say, "What about investment?" Sure, it's a good thing, but the fact remains that giving the many a little more has a greater impact than giving the few a lot more. And the money tends to trickle back up anyway.

-we (as a community--large or small) are responsible for our poor members, and this means that we should have social programs that help them pull themselves up... which I think really has to include some kind of educational/vocational component in addition to meeting housing/food needs

-taxes are good for funding social programs, though I think that there needs to be more frugality and less waste in government spending (it's just--I don't think that taking care of the poor is wasteful)

I agree, and I think it is at least as much a political issue as an economic issue. Kurt Vonnegut once responded to criticisms that social programs were just pissing money away, saying "What is money for, if not to piss away?" Heh.

[booyalab]

Originally Posted by Eileen

-the idea that a free market is some kind of curative agent or stabilizer for a shitty economic environment is bullshit

I don't know that any economists consider a free market to be a curative agent. Every economy experiences highs and lows. It's just like Enyo said, government intervention usually just prolongs the low times. The stock market crash of 1987 was just as big as The Great Depression but, unlike Roosevelt, Reagan refused to intervene and the economy worked itself out much faster and less painfully.

-the idea that "wealth trickles down" also seems like bullshit to me, though to a smaller degree than the previous. It seems to me that it may, marginally, but that the majority of wealth stays right where it is (and that the rich stay rich and the poor stay poor)

It's a straw man. You wont find it in any economics textbook and 99% of the time it's used with derogatory connotations.
The sequence actually works in the opposite direction. The first money from investments is spent on hiring people to do the work. Profit comes later.

-we (as a community--large or small) are responsible for our poor members, and this means that we should have social programs that help them pull themselves up... which I think really has to include some kind of educational/vocational component in addition to meeting housing/food needs

I guess the economic answer to this sentiment is "what is the most cost-effective way of reaching that goal?" My personal philosophical answer is "isn't that mighty presumptuous of you?"

-taxes are good for funding social programs, though I think that there needs to be more frugality and less waste in government spending (it's just--I don't think that taking care of the poor is wasteful)

Anticipation of profit (because, remember, profit comes last) has been shown to be the only reliable predictor of cost efficiency.

-outsourcing is bad

Mass trade restrictions all over the world, with the intent of saving jobs, occurred during the Great Depression. Everyone got poorer. Outsourcing is good.

-a lack of "trade" education in public schools is bad for the economy

I'm not sure what you mean here. Although I think a better educated population does tend to increase the number of people in the professional sector which should improve the average standard of living.

-a lowering of standards for college entrance and encouraging all students to go to college is both harmful to the educational system and to the economy

I don't know how it effects the economy, but I do agree that not everyone is suited for college.