Thursday, June 20, 2013

Lord Keynes — Gardiner Means on Administered Prices

Gardiner’s conclusions are worth quoting:
“... the actual behavior of administration-dominated prices … tends to differ so sharply from the behaviour to be expected from classical theory as to challenge the basic conclusions of that theory. However well the theory may apply to market-dominated prices, it would not seem to apply to the bulk of the administration-dominated prices in the sample or to that part of the industrial world which they typify. Until economic theory can explain and take into account the implications of this nonclassical behavior of administered prices, it provides a poor basis for public policy. The challenge which administered prices make to classical economics is as fundamental as that made by the quantum to classical physics.” (Means 1972: 304).
Administered price behaviour in real world economies really does lead to revolutionary conclusions for economic theory: so much of neoclassical economics and Austrian economic theory simply collapses and must be abandoned once one understands its implications.

Disequilibrium prices are deliberately created and maintained by fixprice enterprises in a vast swathe of the economy, simply because they prefer it that way. Such businesses are not generally in the habit of using flexible prices as their normal method of clearing supply, or equating demand with supply.
Social Democracy For The 21St Century: A Post Keynesian Perspective
Gardiner Means on Administered Prices
Lord Keynes

58 comments:

Bob Roddis said...

This line of argument is so stupid and so fraudulent. In fact, Mr. Hickey joined in (probably by accident) refuting it. There is nothing in Austrian analysis to say that sellers will not reduce production as opposed to prices during bad times. Lies lies and more lies. Give up, LK. It's over. You've lost.

http://tinyurl.com/p7lhy3m

Bob Roddis said...

And don't forget this when LK shows up with his idiotic, dishonest and pathetic "market clearing prices" nonsense.

http://tinyurl.com/nngjk6l

LK said...

(1) "There is nothing in Austrian analysis to say that sellers will not reduce production as opposed to prices during bad times."

No, roddis, most Austrians never consider fixprices properly or quantity adjustments and their implications for economic theory.

There are some vague statements in Rothbard that, maybe, businesses might cut production and add excess products to inventory. But Rothbard NEVER understands that this is regular behaviour by many businesses.

And of course, you are so stupid you miss the point.

Price adjustment in Austrian theory is meant to be BOTH a descriptive theory describing how real world markets work (it's largely wrong) AND a prescriptive and ideal vision of economic coordination in Austrian theory is by flexible prices moved by human action towards their market clearing values:

“Mises conceives the market process as coordinative, ‘the essence of coordination of all elements of supply and demand.’ This means that the structure of realized (disequilibrium) prices, which continually emerges in the course of the market process and whose elements are employed for monetary calculation, performs the indispensable function of clearing all markets and, in the process, coordinating the productive employments and combinations of all resources with one another and with the anticipated preferences of consumers.” (Salerno, Joseph T. 1993. “Mises and Hayek Dehomogenized,” Review of Austrian Economics 6.2: 113–146, at p. 124).

Demand is supposed to be adjusted with supply by this process.

Are you such an idiot that you are going to deny even this?

(2) If it is the case that in the real world, production and employment are normally adjusted
to match demand in the vast fixprice markets, this only confirms Keynesian theory: demand drives production and employment.
Extra demand does not necessarily just cause inflation.

In cases of economic crisis, reduced investment, and/or depressed business expectations, when demand falls feedback effects will take over and cause recessions. Markets will not self-correct by flexible prices.

(3) Finally, Roddis has demonstrated time and again he cannot and will not see why his Austrian idiocy is severely undermined by this empirical evidence about how the real world works.

LK said...

And, by the way, we now have Roddis' fellow Austrian Robert Murphy on record telling us that he thinks Bob Roddis is a headcase:

Bob I still think you should talk to a therapist about your need to argue with LK on a daily basis, but that’s not really my business.

http://consultingbyrpm.com/blog/2013/06/mosler-debate.html#comment-66392

Seen that therapist yet, bob?

Bob Roddis said...

If it is the case that in the real world, production and employment are normally adjusted to match demand in the vast fixprice markets, this only confirms Keynesian theory: demand drives production and employment.

Of course there must be buyers of stuff you make or else you can't sell your stuff. If you don't sell as much stuff this year as last year and "demand" for your stuff seems to be shrinking, you should only make as much of it as you can sell. Duh. What a great Keynesian insight! Nobody ever thought of that before! It's just more of your typical garbage.

The issue is whether society needs to be "managed"* by totalitarians like yourself which begs the question as to who selects the "manager" and how do we know in advance that he/she has any sense. It is the free play of uncoerced voluntary exchanges that provides the information about how much stuff and/or jobs/positions are available and wanted and at what prices and in what amounts and in what styles and in what locations for which customers. and even if your "manager" is not the typical sociopathic government creep, he/she certainly lacks the dispersed knowledge to do the Central Planning job you've assigned. And providing an artificial "demand" subsidy to the masses who have overspent is unsustainable and a grotesque distortion of the reality that they should be trying to understand.

I suppose you've found citations to a long history of Austrian writers denying the existence of small niche markets of relatively expensive goods that were formerly mass market goods? How about ten citations of Austrians making the specific argument that such markets are impossible because sellers MUST AND ALWAYS DO SLASH PRICES TO INCREASE VOLUME. OMG! Why don't the sellers of Model T's slash their prices to increase sales?

http://www.hemmings.com/classifieds/carsforsale/ford/model_t/1578827.html

Maybe I'm being presumptuous. Maybe you aren't a liar. Maybe you just aren't very smart.

*"Thus Keynes’s argument for MANAGED CAPITALISM is both an economic and a moral case". - LK

Bob Roddis said...

For what it's worth, Prof. Murphy does not at enjoy interpersonal disputes. He especially does not like disputes carried on with the "intensity" of what generally goes on between LK and myself. And he especially does not appreciate it happening on his blog especially when the subject matter of the Murphy post is not LK's latest blog post.

LK said...

"Of course there must be buyers of stuff you make or else you can't sell your stuff. etc. "

You're confusing basic utility derived from/demand for a product with the question of excess stock not sold when demand falls, and what is done by business in the latter case.

As said above, price adjustment in Austrian theory is meant to be BOTH a descriptive theory describing how real world markets work (it's largely wrong) AND a prescriptive and ideal vision of economic coordination: flexible prices moved by human action towards their market clearing values adjust demand with supply (as indicated in the Salerno quoted).

Do you deny this?

Let us assume you really are interested in real, productive debate. Capable of answering?

Or are you going to avoid the question, post more irrelevant rubbish, and generally act like idiot headcase Murphy thinks you are?

Bob Roddis said...

As said above, price adjustment in Austrian theory is meant to be BOTH a descriptive theory describing how real world markets work (it's largely wrong) AND a prescriptive and ideal vision of economic coordination: flexible prices moved by human action towards their market clearing values adjust demand with supply (as indicated in the Salerno quoted).

Do you deny this?


I believe your interpretation of what the past “masters” have said on the subject is dishonest. But I don’t care what the past masters have said if it turns out you are right about what they have written (but you are wrong). I personally will not be bound by anything that someone else might have said if it conflicts with my application of basic Austrian concepts. My application of basic Austrian concepts is exactly how I described things above. If the past masters were wrong, I’m still right. Give me and my cat the Nobel Prize.

Your argument is quite clever (which is why I love you so much) but ultimately phony. It is the “free play of the market”(vs. a “managed” market) that provides the information necessary to know how to proceed in the future whether that entails slashing prices or production or both or whatever. Employing that essential information will result in fewer errors as to what to make for whom in what amounts and at what prices in the future. People will make the best effort to make only what they can profitably sell at whatever price that might be. The unadulterated market with its unadulterated prices tells you what people actually want and will pay for, which is quite different than the unsustainable and artificial “wants” that result after the masses receive a funny money injection subsidy of stolen purchasing power.

LK said...

"But I don’t care what the past masters have said if it turns out you are right about what they have written (but you are wrong). I personally will not be bound by anything that someone else might have said if it conflicts with my application of basic Austrian concepts. My application of basic Austrian concepts is exactly how I described things above. If the past masters were wrong, I’m still right. Give me and my cat the Nobel Prize.

My god. This is simply the best statement Roddis have ever made.

Translation: Roddis is saying he does NOT care what actual and real Austrian economists say, and ultimately does not even consider himself bound by actual Austrian theories or concepts he doesn't understand or like!

Even though claims that no non-Austrian in human history understands "basic Austrian concepts", he now says he himself is not even bound by these "basic Austrian concepts"!

At this point, does anyone take roddis seriously?

LK said...

An example from Salerno:

“Entrepreneurs, however, can formulate and execute production plans only in a world in which economic calculation is possible, that is, in which catallactic competition generates market-clearing prices which, at every moment of calendar time and without fail, reflect, promote, and coordinate those uses of the available scarce resources that are expected to be the most highly valued by consumers. Price coordination, therefore, is not a phenomenon associated with an unrealizable state of equilibrium, however the latter is conceived; rather, price coordination is the essential characteristic of the plain state of rest, which, as Mises tells us, ‘… is not an imaginary construction but the adequate description of what happens again and again on every market.’”
(Salerno, Joseph T. 2010. Money, Sound and Unsound. Ludwig von Mises Institute, Auburn, Ala. pp. 182–183).

Does Roddis agree with this or not?

Bob Roddis said...

I agree with Salerno because what he said is basically another way of saying what I have said. You are dishonestly disassociating the term "prices" from what it is that is being offered for sale and being sold. We've been over this 27 times before and twice already today (so maybe I do need therapy by continuing to engage you).

As to my comment about the past masters, Hayek claims "secondary deflation" to be a problem. Salerno denies this. My own independent analysis says that it is not a problem. Hayek tends to be more of a statist than Salerno or I am. So what? The concepts are not that difficult to either understand or apply which is why I accuse you of being dishonest as opposed to being stupid.

Remember David Ramsey Steele’s book “From Marx to Mises: Post Capitalist Society and the Challenge of Economic Calculation”? Mises claimed economic calculation was “impossible” under socialism while Steele said that it was “possible” just extremely impaired and extremely difficult. I tend to agree with Steele. So what? That doesn’t help you or Trotsky very much, does it?

LK said...

"I agree with Salerno because what he said is basically another way of saying what I have said. "

lol.. Unless what you're saying is that in the real world prices really are flexible and moved towards their market clearing values by business people to equate demand with supply when demand for a product falls, then, NO, what Salerno says there is the OPPOSITE of what you've been saying.

You are a complete and utter jackass, roddis.

Bob Roddis said...

No, LK. What Salerno said is completely in line with what I said. You're a liar and a jackass.

A "market clearing price" must be attached to a good or a service. People are only going to attempt to provide the good or service in the amount, style, location etc... which will sell AND make a profit. Nobody is going to make a bunch of stuff and then continuously and forever slash prices to make sales below cost of production, are they?

And for the 575th time, if this is your "final answer" to the Austrian evisceration of Keynesianism, you've lost the argument and your dishonest desperation is proof of that.

While you are at it. let's assume just for sake of argument that Salerno is wrong and that I have a completely different view of things than Salerno and the rest of them. Let's debate my position, not Salerno's, ok? If I'm right about everything, what is the relevance of the past masters? If I'm wrong, what is the relevance of the past masters?

LK said...

"A "market clearing price" must be attached to a good or a service. People are only going to attempt to provide the good or service in the amount, style, location etc... which will sell AND make a profit"

That is already implied in all the comments above, idiot.

The issue is with goods demanded but when demand for the quantity produced falls -- that is, when excess unsold goods build up. What happens in those circumstances?

Austrian theory sees the general result to be business lowering prices below costs of production to clear markets:

"There is no reason why prices cannot fall low enough, in a free market, to clear the market and sell all the goods available. If businessmen choose to keep prices up, they are simply speculating on an imminent rise in market prices; they are, in short, voluntarily investing in inventory. If they wish to sell their "surplus" stock, they need only cut their prices low enough to sell all of their product. But won't they then suffer losses? Of course, but now the discussion has shifted to a different plane. We find no overproduction, we find now that the selling prices of products are below their cost of production. But since costs are determined by expected future selling prices, this means that costs were previously bid too high by entrepreneurs."

Murray Newton Rothbard, America's Great Depression (5th edn, 2008), pp. 56-57.

As usual, you're an ignorant fool, ignorant of your own theory.

But now you have told us that you do not even care about previous Austrian theory, and that "Austrian theory" is now to be reduced to whatever hare-brained idiocy you spout, all is clear!

Tom Hickey said...

Isn't keeping available product off the market to support a price an example of monopoly pricing?

As I have said, business people know and the texts teach that to be successful in one's market one has create artificial scarcity for one's products and there are myriad ways that businesses to this, depending on their size, market segment and positioning, for instance.

From experience, I would say that the situation described in the Salerno quote is normative rather than descriptive of final goods markets. It might apply as a special case in some markets, but not as a general rule.

LK said...

Tom Hickey@June 21, 2013 at 12:30 PM:

"I would say that the situation described in the Salerno quote is normative rather than descriptive of final goods markets. "

That is what I thought at first too, but reading the passage in context carefully, I think he really does want it be a descriptive explanation of the real world:

http://socialdemocracy21stcentury.blogspot.com/2013/06/salerno-on-market-clearing-prices-in.html

The absurdity of this is clear.

Roger Erickson said...

LK and BR are subsidizing aggregate demand for bandwidth all by themselves! Good job. :)

Meanwhile, Gardiner's conclusion extends Mosler's?
BOTH the finance and economics professions are more trouble than they're worth?

Haven't many people said that from the beginning? Just turns out that financial & economic theories are useful for aristocrats and other frauds ... and the propaganda both use. Just name finance and economics as tools of the advertising industry ... so we can all get on with our evolution business?

Bob Roddis said...

Let's again review the past arguments and admissions.

Lord Keynes on March 22, 2013 at 9:04 AM said:

I do not deny that inflexible prices are an element in the Hayekian ABCT.

http://tinyurl.com/abqlro8

Later but weeks ago:

[Roddis] What actually happened to the unsold 40,000? Don't you understand the real world enough to tell us?

[Tom Hickey] Depends on the merchandise, but in aggregate some was given to charity and ended up in thrift stores, some was liquidated and ended up in discount houses, some was factored and sold into the export market, some was sold through sales promotions, and some unplanned inventory was held over to the next period.

[LK] Right. I am not denying that this or combination of some of these might happen in some businesses. Or that often retail businesses want to clear stock by clearance sales.

http://tinyurl.com/mv4gt3n

Que sera, sera, whatever will be will be. Prices (or the lack of sales) will inform people about what they should be making for whom in what amounts and in what styles at what prices. Or whether they should have a fire sale, or reduce production and/or hold onto inventory for years when the price might rise. Duh. zzzzzzzzzzzzzzz.

Me wasting my precious time debating these utterly stupid, dishonest and repeatedly vanquished points by LK is why I probably do need therapy.

LK said...

Notice the qualification:

"Right. I am not denying that this or combination of some of these might happen in some businesses. Or that often retail businesses want to clear stock by clearance sales."

And roddis's dishonest suppression of the words:

"But if you are a producer, it is just as likely that you would add a lot of the unsold goods to inventory too.

But as you say, the "important point is that prices and wages in general were not adjusted down" by the business. Its fixprice for newly produced goods is probably the same, unless changes in factor inputs prices that are expected to be permanent occur. "

http://mikenormaneconomics.blogspot.com/2013/05/lord-keynes-misesian-economic.html?showComment=1368377554609#c9007068213696460759

The existence of periodic and limited clearance sales of excess stock in, e.g., retail businesses does not confirm the Austrian theory.

The Austrian theory is that prices in general for goods are flexible and moved to clear ENTIRE goods markets. That is not what happens in a world of fixprices.

Most businesses -- above all, producers -- are more likely cut production and employment and built up inventory.

Yet again roddis proves he cannot, and will not, understand any argument presented to him.

Not to mention his absurd admission now that:

"I personally will not be bound by anything that someone else might have said if it conflicts with my application of basic Austrian concepts."

In other words, who cares about previous Austrian theory, when you're some idiot who can re-invent it at will!

Bob Roddis said...

Most businesses -- above all, producers -- are more likely cut production and employment and built up inventory.

Good for them. That's consistent with my most excellent reformulation of the Austrian analysis. Now that I've fixed the analysis of LK's ephemeral "slashing prices only" school of economics, what's his problem? Let's debate my excellent reformulation.

LK said...

"That's consistent with my most excellent reformulation of the Austrian analysis."

So you're admitting most fixprice businesses are generally going to equate supply with demand by adjusting output and employment when demand changes?

That logically entails that in fixprice sectors (a large part of the economy) extra demand will induce extra production, output and employment.

Do you agree with the latter statement?

Bob Roddis said...

So you're admitting most fixprice businesses are generally going to equate supply with demand by adjusting output and employment when demand changes?

I'm not admitting that there is such a thing as a "fixprice" business. I'm admitting that businesses may choose to reduce production in the face of bad times in lieu of slashing prices. I will admit that additional "demand" will probably induce additional production and sales generally. Who knew? zzzzzzzzzzzzzzz

Tom Hickey said...

Supply-demand equilibrium models are fundamentally based on prices adjusting to relative changes in supply and demand, that is bids and offers are quantity sensitive.

As New Keynesians point out, both are "sticky" because product offers don't necessarily fall when supply increases since goods are withheld to maintain price, nor do wage offers fall as employer demand for labor decreases, since labor is reluctant to accept a lower wage, workers having debt that don't adjust nominally to a fall in the real wage. Rather, employers prune their workforce, laying off less efficient workers. While the use that New Keynesians make of this theoretically may be questionable, I don't think that the observation is controversial. Prices don't adjust iaw the "law" of supply and demand, revealing that the "law" is a special case rather than a law as in natural science, which it is supposed to mimic.

Economic behavior iaw "the law of supply and demand" is normative rather than descriptive.

Tom Hickey said...

LK: That is what I thought at first too, but reading the passage in context carefully, I think he really does want it be adescriptive explanation of the real world

I took it to be descriptive. I think that Austrians and neoclassical tend to conflate normative and descriptive because all models represent how things stand in an the imaginary (possible) world of the model. To be a possible world, the model has to be consistent. The empirical question is then how closely the imaginary (possible) world of the model matches up with actual events and that requires looking at what actually happens.

No model is expected to be a perfect replica of the actual world for it would have to be the actual world instead of an abstraction (simplification). But it should represent accurately what it claims to represent. When claims go beyond the model, then the claim is either excessive or the model is being used normatively (ideologically). The is the foundation of philosophy of science, and I am afraid that lot of economists either don't understand this or ignore it if they do.

Tom Hickey said...

BTW, in Styles of Thinking, later re-issued as The Art of Thinking, psychologists Harrison and Bramson identify five basic categories of thinking. In one style of thinking, logic and the apriori are dominant and thinkers of this type are likely to be ideologically driven to the degree that when facts contradict the ideology, then ideology prevails over the facts.

More recent studies have shown that when the facts are brought out, those deeply committed to an ideology double down instead of changing their position.

I think we are see this in the case of many people in economics especially when the economics has policy consequences.

The so-called law of supply and demand underlies the model(s) of economic liberalism, both neoclassical and Austrian, in that the roots are the same, the initial Austrians being contributors to neoclassical development and Hayek straddling the two positions after they separated.

LK said...

(1) "I'm not admitting that there is such a thing as a "fixprice" business. "

So now we are treated to the sight of Roddis denying that there is such a thing as a business that uses administered prices!!

(2) "I will admit that additional "demand" will probably induce additional production and sales generally"

So a simple Keynesian stimulus, say, taxes cuts for businesses and households (with deficit spending to cover shortfall in tax revenue loss) which leads to greater demand should "probably induce additional production and sales generally"?

Yes or no?

Bob Roddis said...

Speaking of psychological analysis of authoritarian personalities…..

The difference between authoritarian Keynsians and libertarians is that libertarians believe average people are smart enough to know whether they should slash prices or cut production. Keynesians believe that average people are too stupid to know what to do and require "management" by their authoritarian Keynesian betters. LK's bullshit claim that Austrian ALWAYS insist that business people ALWAYS slash prices in a crisis as opposed to cutting production is just a diversion from the real issue of freedom vs. Keynesian slavery.

This is the same type of diversionary bullshit employed by the authoritarian government careerist hacks who are compelled to change the subject from what Eric Snowden has disclosed to attacking his alleged (and made-up) character flaws.

http://original.antiwar.com/justin/2013/06/20/why-the-washington-elite-hates-edward-snowden/

Birds of a feather…..

LK said...

"Bob Roddis said...

Speaking of psychological analysis of authoritarian personalities….."


Yes, we know you are a master of the red herring and straw man fallacies.

Answer the question instead of being evasive:

(1)is there such a thing as a business that uses administered prices?

(2) So a simple Keynesian stimulus, say, taxes cuts for businesses and households (with deficit spending to cover shortfall in tax revenue loss) which leads to greater demand should "probably induce additional production and sales generally"?

Yes or no?
-----

Care to answer? Or just a cowardly idiot?

Bob Roddis said...

So a simple Keynesian stimulus, say, taxes cuts for businesses and households (with deficit spending to cover shortfall in tax revenue loss) which leads to greater demand should "probably induce additional production and sales generally"?

Yes or no?


Tax cuts are purely "Keynesian"? What will probably happen* is that people will spend the extra money not taxed and the deficit money too distorting the price, investment and capital structure. Who denies that Keynesian "stimulus" sometimes "stimulates"? The "stimulation" is unnecessary and distorts.

I just worked on getting my brother-in-law's credit cards paid off. He then he took them back to the bar and ran them back up buying booze. That temporarily stimulated his drinking and the bar's income. Later, he has to pay the tab.

*It's also possible that everyone at that moment might decide to become an anti-materialist monk. People have free will.

LK said...

So in your last rant, you are saying that, yes, greater demand from a Keynesian stimulus should probably induce greater production, employment and output?

Bob Roddis said...

When LK's lies are repeatedly refuted, he doubles down.

But is successful capitalist production only possible in a world generating and moving towards market-clearing prices? The answer is, of course, no.

http://socialdemocracy21stcentury.blogspot.com/2013/06/salerno-on-market-clearing-prices-in.html

Right. In his "fixprice" example, the business cut back production and then sold what was made at "market clearing prices", right?

This line of argument from LK is so stupid and pathetic. By sticking to it, it proves he's lost.

LK said...

"What will probably happen* is that people will spend the extra money not taxed and the deficit money too distorting the price, investment and capital structure. Who denies that Keynesian "stimulus" sometimes "stimulates"? The "stimulation" is unnecessary and distorts. "

Distort prices away from what??

We have already established that you admit that most private businesses use administered prices -- prices which are not flexibly moved towards their market clearing values, but generally held constant even when demand changes.

So what are prices distorted away from?

LK said...

" In his "fixprice" example, the business cut back production and then sold what was made at "market clearing prices", right?"

No, idiot. They sold their product at an administered price -- based on cost of production plus profit markup -- that was not a market clearing price.

You continue to prove you don't even understand the concept of a market clearing price. But then you've already freely admitted to this level of incredible ignorance.

Bob Roddis said...

Didn't they sell the reduced production at an unreduced price, thereby clearing the market?

LK said...

"Didn't they sell the reduced production at an unreduced price, thereby clearing the market? "

WOW. Idiot. You are an absolute idiot, roddis. In fact, you need a prize for record idiocy.

You undoubtedly don't understand the concept of a market clearing price.

A quantity adjustment to equate supply with demand is not market clearing based on price.

"A market clearing price is the price of goods or a service at which quantity supplied is equal to quantity demanded, also called the equilibrium price."
http://en.wikipedia.org/wiki/Market_clearing

Bob Roddis said...

LK, you miserable jerk. It's your example, remember.

In your "fixprice" example, in year 3, the business only made and sold 20,000 units at the unreduced price, right, down from 100,000 at the same price in past good years, right?

So, in year 3, the unreduced price of the lower number of units offered and purchased was "the price of goods at which quantity supplied was equal to quantity demanded, a market clearing price, also called the equilibrium price."

I was wrong to think you were so clever. You're just not very bright.

Roger Erickson said...

BR says: "Let's again review the past arguments and admissions."

Please God, let's NOT!

Roger Erickson said...

Tom, can you please just set BR up with a private call/response channel?

Say, an Automatic Stabilizer that just triggers either "yes he did" or "no, he didn't" ... perpetually?

Or, just alternate Obsessive and Compulsive?

Bob Roddis said...

Mr. Erickson:

I'm out of here.

LK said...

"So, in year 3, the unreduced price of the lower number of units offered and purchased was "the price of goods at which quantity supplied was equal to quantity demanded, a market clearing price, also called the equilibrium price."

No, roddis, an unchanged price for some goods whose production is cut to equal demand is not an "equilibrium price".

All these years you've been mouthing off about how nobody understands "basic Austrian concepts", and yet you yourself haven't the foggiest idea what an "equilibrium price" even is.

You are a fool, an idiot and a jackass. Go away and learn the definition of "equilibrium/market clearing price" before exposing your idiocy to everybody here even further.

Bob Roddis said...

I know I promised Mr.Erickson I was leaving but....

"an unchanged price for some goods whose production is cut to equal demand"

cleared the market, didn't it??????? No matter what you called it, the market cleared at that price, didn't it??????

Yes or no? Coward.

LK said...

"cleared the market, didn't it???????"

No. Because the businesses still have stock they want to sell, but are unwilling to cut prices and clear stock in the conventional sense of flexible market clearing prices.

Idiot. Run off to Murphy's blog with your fellow cultist lunatics.

And learn the definition of market clearing price.

Tom Hickey said...

Tom, can you please just set BR up with a private call/response channel?

I think that these "debates" are revealing. I don't post this stuff just because I perversely enjoying setting people on each other.

The fact is that these are ideas are now to the fore not only in the US but abroad, too, and a lot of the economic debate internationally depends on some of these key ideas and assumptions.

If one wish to engage the Paul Ryan's and Rans Paul's in US politics over economic policy, for instance, this is what one will hear.

"Market clearing" is also the basis of the UK and EZ policies of expansionary fiscal austerity, the idea being that the real wage is still too high for these economies to be "competitive" so more "discipline" must be exerted to bring it into line with the global wage.

Bob Roddis said...

There is no statement in your example as to how many units are sitting unsold in inventory if any after the sale. Your example appeared to suggest that inventory plus 1000 new units cleared the market.

They sell 21,000 in Q1, with an extra 1,000 made by quickly using excess capacity and 10,000 from inventory stock.

It's your example. I can't read your mind.

http://tinyurl.com/mrwzn7v

Again, your original example actually comes from 2008-2009 so the original overshoot on production was caused in the first place by funny money distortion of prices and apparent but artificial and unsustainable demand.

LK said...

(1) "Again, your original example actually comes from 2008-2009 so the original overshoot on production was caused in the first place by funny money distortion of prices and apparent but artificial and unsustainable demand. "

So after this absurd demonstration of your inability to understand the concept of a market clearing price, you've folded.

(2) "So a simple Keynesian stimulus, say, taxes cuts for businesses and households (with deficit spending to cover shortfall in tax revenue loss) which leads to greater demand should "probably induce additional production and sales generally"?"

And we can assume from your comment @June 21, 2013 at 3:01 PM that your answer to this question is "yes".

All in all, you've actually conceded a great deal.



Also,

Bob Roddis said...

you've folded

No, liar. You haven't stated how many unsold items remained in inventory, if any, after the sale of the 21,000.

This is why I shouldn't "debate" LK. It has nothing to do with differences in economic theories or politics or whatever. He's calling names because his example either says what I thought it said, or his example is unclear.

And I've conceded nothing.

LK said...

For the education of Roddis, with inventory changes:

(1) year 1: a business sells 100,000 units;

(2) year 2: only 60,000 are sold, with monthly sales failing in last months, though prices are not cut. [Therefore it follows that 40,000 unsold goods were added to stock, in addition to whatever stock they already held, say, for example, 10,000, giving a total of 50,000] ;

(3) year 3: in first quarter
production is cut to 10,000 units (instead of 33,000 as in year 1), with a number of workers fired, though prices are not cut, excess capacity and stock are available to meet any extra demand. [There is a total of 50,000 in stock]

http://mikenormaneconomics.blogspot.com/2013/05/lord-keynes-misesian-economic.html?showComment=1368375796632#c8567706503246680200
--------------

Therefore the business has excess supply it wants to sell. Markets have NOT cleared, and certainly not by price adjustment.

Roddis demonstrates his continuing idiocy.

LK said...

Also, answer the questions, coward:

(1) "So a simple Keynesian stimulus, say, taxes cuts for businesses and households (with deficit spending to cover shortfall in tax revenue loss) which leads to greater demand should "probably induce additional production and sales generally"?

Yes or no?

(2) "What will probably happen* is that people will spend the extra money not taxed and the deficit money too distorting the price, investment and capital structure. "

Distort prices away from what??
We have already established that you admit that most private businesses use administered prices -- prices which are not flexibly moved towards their market clearing values, but generally held constant even when demand changes.

So what are prices distorted away from?

Bob Roddis said...

LK: THERE IS NO MENTION IN YOUR EXAMPLE OF HOW MANY UNITS WERE MADE OTHER THAN 33,000 IN THE Q1 OF Y1 AND 20,000 IN Q1 OF Y3 PLUS an extra 1,000 made by quickly using excess capacity. You specifically stated that THEY SOLD THE 20,000 MADE IN Q1 PLUS THE 1,000 QUICKLY MADE USING EXCESS CAPACITY WHICH TOTALLED 21,000. ACCORDING TO YOUR OWN EXAMPLE, THEY SOLD OUT THE ENTIRE PRODUCTION THEY MADE:

3) year 3: in first quarter production is cut to 20,000 units (instead of 33,000 as in year 1), with a number of workers fired, though prices are not cut, and excess capacity is available to meet any extra demand.
They sell 21,000 in Q1, with an extra 1,000 made by quickly using excess capacity.


http://consultingbyrpm.com/blog/2013/05/krugmans-botched-inflation-call-and-scary-other-country-reference.html#comment-63029

You are one disturbed person LK, calling me names for almost two months because you cannot even read your own made-up example.

It is clearly pointless to engage you further.

LK said...

No, roddis, I clarified the original example here:

http://mikenormaneconomics.blogspot.com/2013/05/lord-keynes-misesian-economic.html?showComment=1368375796632#c8567706503246680200

All these capital letters and inability to engage with a simple hypothetical example as given above?

This seems to confirm you're an idiot and -- as Murphy suggests -
a headcase:

:Bob I still think you should talk to a therapist about your need to argue with LK on a daily basis, but that’s not really my business."

http://consultingbyrpm.com/blog/2013/06/mosler-debate.html#comment-66392

Off to see your therapist?

Bob Roddis said...

I'm a head case for assuming you are anything other than a disturbed lying bastard and for trying to engage you in a discussion.

In your amended example, all the stock is still completely sold out:

first quarter production is cut to 10,000 units (instead of 33,000 as in year 1)

They sell 21,000 in Q1, with an extra 1,000 made by quickly using excess capacity and 10,000 from inventory stock.


10,000 made normally, 10,000 from inventory stock and an EXTRA 1,000 to meet demand then 21,000 sold. The entire stock was sold out ACCORDING TO YOUR EXAMPLE.

This is all we do. You lie, I correct you. You lie some more and I correct you some more.

Murphy's right. It's not healthy.

LK said...
This comment has been removed by the author.
LK said...

"In your amended example, all the stock is still completely sold out

lol... in the amended example, as given right above for anyone to see, it is perfectly clear that all stock is NOT sold:

http://mikenormaneconomics.blogspot.com/2013/06/lord-keynes-gardiner-means-on.html?showComment=1371883623266#c1630275482257283728

As this point, it is you who are a bizarre liar or, more likely, an incompetent fool.

Also notice how you're also incapable of answering simple questions posed to you above too @June 22, 2013 at 2:55 AM.

In short, you're an idiot, coward, ignoramus, fool, and jackass... Have I left anything out?

LK said...

And also even if one wants to pose a hypothetical example where all excess inventory is sold, that is not market-clearing through price reduction or Austrian economic coordination, but a different process
by which supply is equated with demand by quantity adjustment.

Bob Roddis said...

And also even if one wants to pose a hypothetical example where all excess inventory is sold, that is not market-clearing through price reduction or Austrian economic coordination, but a different process by which supply is equated with demand by quantity adjustment.

Quantity adjustment is perfectly consistent with "unadulterated prices providing essential information about actual unsubsidized demand" which is what the concept of economic calculation concerns.

LK said...

"Quantity adjustment is perfectly consistent with "unadulterated prices providing essential information about actual unsubsidized demand" which is what the concept of economic calculation concerns."

No, it isn't consistent with actual Austrian price theory and economic coordination theory as held by Mises and Rothbard and other Austrian economists:

"Entrepreneurs, however, can formulate and execute production plans only in a world in which economic calculation is possible, that is, in which catallactic competition generates market-clearing prices which, at every moment of calendar time and without fail, reflect, promote, and coordinate those uses of the available scarce resources that are expected to be the most highly valued by consumers. Price coordination, therefore, is not a phenomenon associated with an unrealizable state of equilibrium, however the latter is conceived; rather, price coordination is the essential characteristic of the plain state of rest, which, as Mises tells us, ‘… is not an imaginary construction but the adequate description of what happens again and again on every market.’” (Salerno, Joseph T. 2010. Money, Sound and Unsound. Ludwig von Mises Institute, Auburn, Ala. pp. 182–183).

“Mises conceives the market process as coordinative, ‘the essence of coordination of all elements of supply and demand.’ This means that the structure of realized (disequilibrium) prices, which continually emerges in the course of the market process and whose elements are employed for monetary calculation, performs the indispensable function of clearing all markets and, in the process, coordinating the productive employments and combinations of all resources with one another and with the anticipated preferences of consumers.”
(Salerno, Joseph T. 1993. “Mises and Hayek Dehomogenized,” Review of Austrian Economics 6.2: p. 124).
-------

Presumably, you're going to tell us now that you do not care what any other Austrian economist has said, and that "Austrian theory" is now to be re-defined as whatever crazy idiocy that comes out of your mouth.

Bob Roddis said...

LK: You're like a mangy dog chasing it's tail in a circle.

http://mikenormaneconomics.blogspot.com/2013/06/lord-keynes-gardiner-means-on.html?showComment=1371834868039#c6317128672254784998

There's nothing left to say. It's over. Give it up.

That's all folks.

http://www.youtube.com/watch?v=-_kwXNVCaxY

LK said...

"There's nothing left to say. It's over."

Correct. You're now exposed as a half-baked lunatic who wants to simply re-invent Austrian theories at will.

You're not presenting or defending actual "Austrian economics", as in the published theories of Mises, Rothbard or Hayek at all.

Not only do you not understand "basic Austrian concepts" (as we knew a long time ago), but now you wish to invent some gibberish idiocy you call your "most excellent reformulation of the Austrian analysis" or whatever horses**t you dreamed up.

Good riddance.