The Pitchforks Are Coming For Us Plutocrats

[Kshartle]

Awesome.

So then, if you agree that production is done only when it coincides with forecasts of projected consumption appreciation/enjoyment/valuation whatever…

…then would it be safe to say that you actually agree that production and consumption appreciation/enjoyment/valuation/whatever are in fact symbiotic? That consumers consume appreciate/enjoy/value/whatever what has been produced for them, and producers produce what they forecast will be consumed appreciated/valued/enjoyed/whatevered?

sym·bi·o·sis (smb-ss, -b-)
n. pl. sym·bi·o·ses (-sz)

A relationship of mutual benefit or dependence.

--------------------------------------------------------------------------------

No. Consumers do not benefit producers nor are producers dependant on other consumers. They are only dependant on other producers.

If you have a farm it doesn't help you if I volunteer to eat your crops, it only helps if I trade you my production (meat perhaps) for it. You don't produce for my consumption you produce for your consumption. Trading with me is how you increase your consumption.

Everyone depends on producers, no one depends on consumers. Only the production of value matters to the economy, not the consumption of value, that's just the pay off for the work. This principle seems confusing because we use money instead of barter and have a highly specialized workforce. There is a critical distinction though. Production does not rely on consumption. That is why attempts to stimulate consumption do not result in more production, only a distortion of production that leaves us with debt and malinvestment. The subsequent crash gives up high unemployment and a bunch of stuff thats worth a lot less than we paid for it (think housing crisis).

Stimulation of production leads to greater consumption though. They don't have a symbiotic relationship. One is 100% dependant upon the other. You can make anything regardless of anyone else. You make it purely to increase your consumption or the consumption of people you value (hence still benefiting you).

[Kshartle]

Awesome.

So then, if you agree that production is done only when it coincides with forecasts of projected consumption appreciation/enjoyment/valuation whatever…

…then would it be safe to say that you actually agree that production and consumption appreciation/enjoyment/valuation/whatever are in fact symbiotic? That consumers consume appreciate/enjoy/value/whatever what has been produced for them, and producers produce what they forecast will be consumed appreciated/valued/enjoyed/whatevered?

I'm not kshartle, obviously, but I agree with that and I think he will also.
However, and this is key, the producer will NOT produce anything that he doesn't think can be purchased by value-for-value by someone else. In other words, the fact that someone wants to consume something doesn't make him a consumer unless he can actually provide value-for-value.

I can only agree with a little bit but I think the reality is still being lost. I think you cleared it up in a lot fewer words than I did.

- Yes you did

For the three paragraph version of Tech's last sentence see my previous post.

[moda0306]

Of course a consumer will have to provide something of value.  In our economy, it is almost always money.  And in our economy, MOST of that money is obtained through going to work... which is essentially selling your time/energy/knowledge to another party so they my profit.

This money is usually in some sort of reserve bucket that we accumulate.  We don't HAVE to spend income (individually).

And if we don't pay attention to what factors might keep people from wanting to part with their money far more than they usually do (usually do to the increased risk of not having money at certain times), we will fail to analyze economics correctly.  If we fail to realize what fixed expenses producers in the REAL ECONOMY have to pay for in the short-term to avoid going bankrupt, will will fail to analyze economics correctly.

Our willingness to GIVE resources (whether time, money, energy, raw materials, or capital goods) to GET different ones is essentially what an economy is.  Some resources have an inherent flexibility to them (money) while others do not (a flat screen TV).  When I make the decision to TRADE flexibility (money) for fun (flat TV), I am taking a financial risk.  That financial risk is what the producers of those TV's need me to take for them to survive and prosper, financially.  They need this to happen steadily and abundantly enough for them to pay their fixed expenses.  Recessions upset this process, as everyone re-evaluates risk and tries to tighten their belts at the same time.  Those who chose to accumulate dollars instead of fixed equipment fare better because of the flexibility it gives them. This, at the very least, should be understood by market participants.  It doesn't need to imply counter-cyclical government action is correct, but you do need to know what a recession means for you if you chose to accumulate fixed equipment instead of dollars.

[Pointedstick]

Do you guys not understand that "consumer" has an economic definition that implies a means of payment? A robber is not a consumer in these kind of discussions. A person who walks into Wal-Mart with a credit card is. So of course the consumer benefits the producer. He purchases what the producer has produced, generating profits for the producer.

I mean, right? Is there a strange alternate universe in which this is not true?

[Kshartle]

Of course a consumer will have to provide something of value.  In our economy, it is almost always money. 

Our money doesn't have value, that's the thing that really screws up our economy and makes us poorer than we would otherwise be. That's what hurts our production.

Our money is conjured out of thin air. You can't conjur something of value out the thin air. That's called magic, and it belongs in the religion thread.

This is why consumption has shifted from producers to the rulers, their direct servants and the lesiure class (professional poor/profession voter). This is a huge disencentive to be a producer and a huge incentive to be a ruler, a servant of the rulers, or a member of the lesiure class.

Now they can just create slips of paper that have no value and obtain things of real value from producers, because if you refuse the valueless slips of paper you will be kidnapped or murdered and you need to pay off your masters with the slips of paper. Everything you trade of value has to be recorded in units of paper and a portion surrendered to your masters.

That is our big problem. Our money supply is worthless. It's not an asset, if you think that, you've been bamboozled. Don't worry, you're in the same boat as 99% of the population. It's called the U.S.S Titanic.

[Kshartle]

Do you guys not understand that "consumer" has an economic definition that implies a means of payment? A robber is not a consumer in these kind of discussions. A person who walks into Wal-Mart with a credit card is. So of course the consumer benefits the producer. He purchases what the producer has produced, generating profits for the producer.

I mean, right? Is there a strange alternate universe in which this is not true?

It's called this universe PS. In this universe it's not true.

The consumer didn't benefit the producer, another producer did. When producer A takes the comsumption credits he obtained and uses them to buy the product he wants he gets his benefit, just as if he had simply bartered for it and cut out the first consumer. The first consumer didn't benefit anyone in this scenario. He isn't needed. If we were bartering this would be more obvious but it is they same even with money, just more difficult to understand.

Consumption benefits no one but the consumer. If he obtained the money by producing, that's when he benefitted everyone. The consumer only benefitted everyone when he produced, not when he spent.

The consumer is not needed. It only appears that he is because you're turning an uneccessary step into a neccessary one. Consumers provide no benefit to anyone but themselves, it's just the consequence of production but completely dependant on it.

[Kshartle]

Please send me your valueless money, immediately.  I've discovered a use for it. 

What's that? I already mention lighting a fire, you can also ummm roll....ciggarettes with it.

[Pointedstick]

I can't deal with this anymore. I'm leaving this thread.

[I Shrugged]

Why are the people who want to raise the minimum wage such pikers?  Why not $30, or $50.  Then we'd all be comfortable.  Wheeeeee!

No, the $13 or $15 is a great example of central planning.  Some people have decided that $15 would be a good minimum wage, for reasons X, Y, and Z.    Need I point out how unsuccessful central planning is?

I was an employer of a few thousand people, 40-50 at a time, with considerable turnover over a period of years.  Many of the 40-50 positions were minimum wage or close to it.  Let me give you my side of the story.  I had a few locations.  Some were wonderfully profitable, some were very marginal.  But you know, you get attached to your stores.  Sometimes you hang in there, a competitor closes, or you figure something out, and the marginal store gets better. 

Now, business school consultants would tell you you're wasting capital and energy.  Close the store, move across town, or something like that.  But you know, people aren't always logical.  And entrepreneurs are people.  So you keep your marginal store, trying to improve it.  Guess what happens when the minimum wage goes up a few bucks an hour???  You finally listen to the logic, and it closes.

Another thing that happens is you experiment with new things.  For example, you add some new services.  Or you try staying open longer hours.  On the margin, these things can be seen to have difficulty breaking even.  But you have heard that adding the services will increase your sales of all your items or services,  and the longer hours will increase sales at all hours because people no longer have to wonder if you are open or closed.  So, you try these things.  Every year you are trying things.  What do you suppose happens to these experiments and their associated labor hours when the minimum wage goes up a few bucks???

There are ALWAYS marginal projects, marginal stores, marginal labor hours.  It is simply amazing that well-educated people buy the argument that raising the minimum wage does not hurt employment.  Come on!  It defies logic. 

And the fact that generation after generation of people embrace central economic planning despite its disastrous track record, well, that's just depressing.

[Kshartle]

And the fact that generation after generation of people embrace central economic planning despite its disastrous track record, well, that's just depressing.

The central planners never stop trying to convince them they can get something for nothing. All they have to do is support the central planners.

[Pointedstick]

I can't deal with this anymore. I'm leaving this thread.

Because of me giving Kshartle a hard time, and asking him to send me his worthless currency?  If so, please just ignore and go forward.  I won't be disturbing the thread again!

Believe me, it wasn't you. I'm just tired of all this pointless nit-picking. "Splitting atoms" and dissecting every point to find anything at all to disagree with. It's obnoxious and I'm sick of it.

[WildAboutHarry]

It seems to me that older people are more likely to be full of bluster because they can't remember what hell they were all about when they were younger.  Put differently, they turn into caricatures of themselves.

This nearly 62 year old feels more like what Abe Simpson described...

I used to be with it, but then they changed what *it* was. Now what I'm with isn't *it*, and what's *it* seems weird and scary to me.

[Mountaineer]

I don't really know what I believe on a lot of subjects anymore. Everything seems so much more complex than I used to think.

I do think employers will automate away the jobs if labor gets more expensive, but that's sort of orthogonal to the point that the author is making. Fighting the minimum wage hike is sort of in the same boat as automating away the jobs if it gets passed; they're both attempts to fight having to pay real employed human beings more money. He seems to trying to convince people that this is the wrong attitude in the first place.

More so than a minimum wage hike, what I think the author wants to convince business owners of is that they should pay their employees more even if they aren't forced to, if not because they think that it will increase the wealth of their customers, but because if they don't, things may get ugly.

I'm way late, and redundant, with my comment on your statement I put in bold letters, but I really know that feeling! 

I feel like age and experience tends to wear off the sharp corners of our dearly held beliefs.  And then comes a time of real reflection, in the presence of some humility.  It's a good thing.  It's another great opportunity for us to look at our beliefs in light of the stark reality we've come to live with, and to revise if necessary.  I think it's a fun and humbling experience. 

FWIW, I would say the opposite is more prevalent.  That is, time will often tend to wear away the foundation and sharpen the corners.  It seems to me that older people are more likely to be full of bluster because they can't remember what hell they were all about when they were younger.  Put differently, they turn into caricatures of themselves.

The interesting (and impressive) thing about this statement for me is that I think PS is probably half our age (I've got a vague notion that you are, like me, in your early 50's, whereas PS is in his mid-20's).

I would describe my journey as a zig-zag roller coaster path from idealism to realism.  When I was younger, I was much more self-centered and condescending.  I thought I knew much of what was worth knowing and believed I was in charge of my own destiny, and thought most people were kind hearted and good (I had sharp corners).  Now I'm closer to the end of my journey than the beginning and have come to realize that the world is mostly an evil place, full of hardships and struggles and people who need one another.  I began to understand what is truly important, seeing glimmers of the ultimate truth, and now try to focus on being kinder and more patient in my interactions with family and friends.  I try to reflect the light of Christ to illuminate a bit of the darkness around me, all the while realizing that that light does not come from me; I am the moon, He is the sun.  I am the rock at the bottom of the waterfall of life; I have been smoothed just a bit over time.

... Mountaineer

[Kshartle]

I can't deal with this anymore. I'm leaving this thread.

Because of me giving Kshartle a hard time, and asking him to send me his worthless currency?  If so, please just ignore and go forward.  I won't be disturbing the thread again!

Believe me, it wasn't you. I'm just tired of all this pointless nit-picking. "Splitting atoms" and dissecting every point to find anything at all to disagree with. It's obnoxious and I'm sick of it.

The point is there is actually a big disagreement PS. The government and media constantly repeat that the consumer is vital. Even in the article you posted, the author puts forward the theory that the economy will be better if more consumers have more money in their pocket at the expense of fewer wealthier people.

This is the dominant economic idea pushed constantly on the TV by the news, Bush, Obama etc. It is no doubt believed by many people here. It's also false.

A consumer, acting as a consumer benefits no one but himself. Consider a simple economy, me, you and Moda. You gather firewood, Moda gathers fish, I work on my tan all day. We use sea shells as money. We each have 20 shells. Moda spends 10 shells to buy firewood from you, you spend 10 shells to buy a fish from him, you are both forced by the rules of our democracy to transfer 10 shells each to me every day which I turn around and you to buy a fish and firewood.

Now my "spending" is your "income". It also looks like my "consumption" is driving your "production" right? Obama or CNBC would point to this as an example of how vital my consumption is to the island's economy.

Is it obvious I'm not helping anyone by consuming or spending? Only production matters, that's it.

The same applies to welfare beneficiaries, people on unemployment, SS, disability, and people who are paid more than their economic value because of government force. The extra purchasing power they get doesn't help the economy by encouraging production. It actually reduces it because it lessens the reward for production, as my example demonstrates. Purchasing power is created by production, so their purchasing power was stolen from others. If it was left with producers, the economy would be better off. Only the producers matter to the economy.

You and moda would actually be better off if you kicked me off the island. You could gather 1/3 the firewood and he could catch one less fish and still be good. Now you could do something more beneficial for yourselves or just have leisure. My spending and consumption helped no one but myself.

[Pointedstick]

Okay, I lied.

The point is there is actually a big disagreement PS.

It is easy to disagree when you deliberately define or redefine the terms to promote disagreement. That's the difference between you and practically everyone else here: you are not interested in finding points of agreement or commonality; only identifying and magnifying differences for the purpose of supporting a point of view that you never question. It's divisive, it's embittering, and frankly it's just plain rude. I'm getting really sick of it.

You appear to be defining the term "consumer" as a synonym of "welfare leech" or maybe just "net consumer." Well, duh. Somebody who steals from the producers, and who never produces anything, or produces less than he consumes, is going to be a drag on the economy, whether that economy consists of three people or 3 billion. I don't think you're really going to get a lot of disagreement here on this extremely libertarian forum that net non-producers drag down the rest of society.

But that's not a sensible definition of "consumer." If it was, there would be a lot of economies without many consumers in it. "Consumer" is not a term that in any way implies what amount of production relative to consumption one engages in. It's incorrect to overload the term with that concept, because it obfuscates every discussion that involves the economic term "consumer."

Rather, we are all consumers at some points in time. When I buy moda's fish, I am a consumer. When Moda buys my firewood, he is a consumer. Even if we kicked you off the island (and I very much wish we could), the island would still have the two of us to consume the results of our own and the other's production. Again, there would have to be. If neither moda nor I ever needed firewood, I would have no reason to produce any, and if neither of us much cared for fish, it would be silly for moda to go fishing. The absence of consumers for those particular goods would dry up the incentive to produce them.

[Mountaineer]

Producer <----> Consumer

Symbiotic relationship.  Chicken and egg.  Both necessary.  Neither more important than the other.  Sustainable.

Pig ----> Bacon.  Only one is necessary.  Pig most important.  Not sustainable. 

Who wants to be the chicken, egg, pig, bacon (for this thread)?

... Mountaineer

[moda0306]

On an island, we probably won't have structural issues with productive capacity exceeding demand in ways that would actually disrupt a fire wood of fish operation.

But imagine you buy a bunch of equipment on a loan. Operate a lot of fixed expenses. Maintain a huge firewood inventory. Now, someone's willingness to trade their money asset (yes, paper money has value... But let's pretend it's gold to avoid that argument) for wood on a steady regular basis is vital. Their willingness to consume a good at a level that they may not need by expending a more flexible asset is vital to the business.

Kshartle... If you don't recognize this reality, I'd be interested to see you run a business. Business owners are constantly trying to drive demand for their product/service. And it's important for them to know that certain economic environments will naturally REDUCE that demand, especially if you produce durable-yet-discretionary goods (like big new fancy houses).

Consumption is probably an imperfect term. "Purchase" is probably more appropriate. I can purchase a car. It doesn't mean I've consumed it. But my PURCHASE was absolutely vital to your business.  You have fixed expenses to pay, and need to sell inventory to pay it.  This isn't some Gilligan's Island fish economy where I can just eat the excess fish nobody buys. A car dealer can't just drive his 300 cars waiting for them to sell if he hits a recession or something similar. He'll go bankrupt.  Steady purchases are vital. These purchases often require a party taking a FINANCIAL RISK by parting with their money for an unnecessary good.  Trillions of dollars of entrepreneurial profit depend on this risk taken by leeches and hard-workers alike.

I'm not trying to use this as an argument for statism. I'm just stating facts about our economy. I don't particularly love the article PS linked to, but the attacks you leveled against it are ridiculous.

Producers' business models rely on steady purchases of their product for them to keep their door open. They need their customers to be willing to trade (gasp) fiat confetti on an abundant and steady enough basis to pay their bills. This is massively important to anyone who wishes to run a business.

Obviously, productive capacity is the main, underlying constraint.  "Can we build it, and if so, how much will it cost us" is the main question of economics. But understanding cash flows and cost accounting and recessions and aggregate demand for your type of product is abundantly important.

[Pointedstick]

But anyway, to get away from the ridiculous mumbo-jumbo that Kshartle is attempting to confuse people with, the real point of the article was not so much about economic efficiency but pure survival. The author was claiming primarily that if income inequality got too high and too many people got pissed off about it, that there is a very real chance that those angry people will rise up and kill people like him, just like they did in a number of Asian and Latin American countries throughout the 20th century. That is a very different point from the claimed economic efficiency of increasing the wages of labor. If the author is wrong about his central point, and there really is no danger of violence from the lower classes, then most of his arguments collapse.

And for the record, I don't agree with everything in the article. I just found it to be a thought-provoking perspective that we don't hear very often.

[Pointedstick]

I fully understand all of that. All of us fully understand that. Is it completely obvious to everybody that people who 1) produce nothing or 2) produce less than they consume are a net drag on society. Even bleeding heart welfare state liberals understand this; either misguidedly believing that their policies transform net consumers into net producers (hah!), or else cravenly exploiting the tendency of net consumers to vote for them and not caring about the consequences of more dependents.

What I primarily object to here is the apparent redefinition of terms that I posit has served to obfuscate rather than enlighten:

"Consumer" appears to have been re-defined to mean "somebody who either produces nothing or produces less than he consumes."

"Producer" appears to have been re-defined to mean "somebody who produces more than he consumes."

Defining the terms in these manners leads to confused arguments because most people who hear the term "consumer," for example, are not picturing criminals, bums, or welfare leeches. It is understood both commonly and by the field of economics that people who operate as producers must also consume (food, water, etc) in order to survive, and also that prior to consuming, people must first produce something to either consume for themselves, or trade for the goods that others have produced. When we talk about a "consumer," we are simply talking about the time when someone is operating in consumption mode. We are not implying that he is a criminal, a bum, a welfare leech, or otherwise a drag on society.

My basic point is that despite the completely obvious fact that something must be produced before it is consumed, that nobody at all is disputing, it is also true that the act of production itself is only done with the goal of satisfying a desire to consume. No production = no needs or desires get satisfied; no needs or desires = no production.

Given reality, it is not possible on a macroeconomic level that there would be no needs or desires. But it can be very true on a micro scale. If nobody in a certain country happens to want nuclear weapons, for example, then nobody will make them for those people's consumption. If nobody happens to want lectures in LGBTQQ studies, then none will be produced. If neither moda nor Kshartle or I, marooned on our desert island, happen to want any spears, then none of us will produce any. If I am alone on that island and I do not enjoy the taste of one of the fruits that grows there, then I will not produce any for myself by picking them.

It's really not that controversial a point, I don't think, to say that what gets produced is driven by what is desired in the first place.

[Kshartle]

1. Consumption is totally dependent on production, and not the other way around, because no one can consume anything that has not been produced.

To add to that, there is no demand until production takes place. You can't demand what hasn't been produced. There was no demand for iPhones until the first ones were made. There was no demand for cars in the 18th Century. These items weren't produced because of anything consumers did. The producer tries their best to create something of value. If they succeed and someone buys that STILL leaves the producer at a loss unless someone else produces what they want. Consumers are useless to the economy, only the producers matter.

They also weren't produced because consumers have money. Money only has value (unless it's also a commodity) if producers have made something of value first, thus creating purchasing power. More money doesn't mean more purchasing power, just dilution of it. Production creates purchasing power, and consumption doesn't create production.

Anyway, obviously you get all that.

[Kshartle]

"Consumer" appears to have been re-defined to mean "somebody who either produces nothing or produces less than he consumes."

"Producer" appears to have been re-defined to mean "somebody who produces more than he consumes."

Defining the terms in these manners leads to confused arguments because most people who hear the term "consumer," for example, are not picturing criminals, bums, or welfare leeches. It is understood both commonly and by the field of economics that people who operate as producers must also consume (food, water, etc) in order to survive, and also that prior to consuming, people must first produce something to either consume for themselves, or trade for the goods that others have produced. When we talk about a "consumer," we are simply talking about the time when someone is operating in consumption mode.

This is not the case PS. Bush, Obama, the TV, they guy who wrote this article and people like him are claiming everyday that the economy will be better if people just "have more money to spend". That means SS, Welfare, Unemployment and government enforced overpayment (min wage hikes). The fantasy is that redistribution from net producers to net consumers will somehow improve the economy because the consumer will drive production. It's a totally false idea. I suspect if you polled the Americans and even this board you'd find a majority that believe this nonsense.

If the prez demands people get a raise so they have more money to spend it can't benefit us because nothing more has been produced to earn the money. It's just a transfer payment to allow DEM VOTERS to get more stuff that belongs to other people. And yet smart people fall for this.............

Everyone acts as a consumer and some act as producers. When they're acting as consumers they are benefitting no one but themselves.

The idea that if consumers stop consuming producers will stop producing is dumb, but this is the dominant belief. As long as something of value is made it will be traded for or consumed by the producer. You don't need to stimulate consumption with transfer payments or laws. All that does is distort the economy negatively. Producers don't need incentive either, they need to be left alone to produce, for their own benefit.

What I've been trying to explain (with all my mumbo jumbo  ), is these little misunderstandings about economics that are held by almost everyone, lead to real problems when the government acts on them and otherwise intelligent people support those acts.

[Mountaineer]

All this time I thought "mumbo jumbo" was very intelligently referring to something objective rather than an emotional subjective thing. 

Mumbo Jumbo (roller coaster), a roller coaster at Flamingo Land Resort, UK
Mumbo Jumbo (Banjo-Kazooie), a video-game character
"Mumbo Jumbo", a song by Foghat
Mumbo Jumbo (novel), a 1972 novel by Ishmael Reed
Mumbo Jumbo (album), an album by the band Air Supply
MumboJumbo, a video game developer and publisher

... Mountaineer

[Kshartle]

All this time I thought "mumbo jumbo" was very intelligently referring to something objective rather than an emotional subjective thing. 

Mumbo Jumbo (roller coaster), a roller coaster at Flamingo Land Resort, UK
Mumbo Jumbo (Banjo-Kazooie), a video-game character
"Mumbo Jumbo", a song by Foghat
Mumbo Jumbo (novel), a 1972 novel by Ishmael Reed
Mumbo Jumbo (album), an album by the band Air Supply
MumboJumbo, a video game developer and publisher

... Mountaineer

I'll try to substitute those definitions in PS' comment.

[Mountaineer]

To add to that, there is no demand until production takes place. You can't demand what hasn't been produced. There was no demand for iPhones until the first ones were made.

It sure seems that iPhones, after the first or second model, have sure been in demand prior to their being produced.  What do you call that?  Anticipation?

How about all the "kickstart" projects where advertising tries to drum up demand and if enough demand is evident, the "producer" gets around to making it?

... Mountaineer 

[Kshartle]

The author was claiming primarily that if income inequality got too high and too many people got pissed off about it, that there is a very real chance that those angry people will rise up and kill people like him, just like they did in a number of Asian and Latin American countries throughout the 20th century.

Buying them off with more printed money and min wage hikes will only further depress the economy and widen the gap and discontent. Embracing capitalism and doing the opposite of what the author says (and Obama pushes) would reverse all that.

I find it hard to believe he's as dumb as he sounds. He must be pandering.