Ahab Posted July 28, 2020 Posted July 28, 2020 (edited) 14 hours ago, The Nehor said: There really not much of anything to call real economics once you get into macroeconomics. Most of it is imaginary. The Reserve injects a billion dollars buying securities. The bank uses that to loan 10 billion dollars. Where did that money come from? Magic! Real economics is a con (confidence) game. The value of something is determined by whatever the market can bear, whatever some people can be persuaded to believe the value is, with the prizes given to those who can pay the prices. Who came up with the idea that a gallon of water is worth a particular amount of money? Someone who determined that water is worth more than money, or at least more than a particular amount of money. And someone who is very thirsty, or who wants to try to control the monetary value of water, will usually give more money to get water, either to drink it or distribute it, if they can't more easily get water from some other source. Edited July 28, 2020 by Ahab
The Nehor Posted July 28, 2020 Posted July 28, 2020 8 hours ago, Robert F. Smith said: Sounds like Puff the Magic Dragon. No, Puff was more rational. The economy is more Lovecraftian. It operates by rules some of which we can sometimes understand but usually we cannot and you have to be literally insane to understand it completely. Either that it or it is completely sane but human reason is flawed and that is why we cannot grasp it. 2
The Nehor Posted July 28, 2020 Posted July 28, 2020 2 hours ago, Ahab said: Real economics is a con (confidence) game. The value of something is determined by whatever the market can bear, whatever some people can be persuaded to believe the value is, with the prizes given to those who can pay the prices. Who came up with the idea that a gallon of water is worth a particular amount of money? Someone who determined that water is worth more than money, or at least more than a particular amount of money. And someone who is very thirsty, or who wants to try to control the monetary value of water, will usually give more money to get water, either to drink it or distribute it, if they can't more easily get water from some other source. That is microeconomics which we do understand much better. Of course the beginning state of economic theory (macro and micro) is to assume the human beings involved are rational. Right there you can see why models regularly fail to predict real world results. It is not that economists are not aware of this (they are) but there is no better starting point. 2
Ahab Posted July 28, 2020 Posted July 28, 2020 5 minutes ago, The Nehor said: No, Puff was more rational. The economy is more Lovecraftian. It operates by rules some of which we can sometimes understand but usually we cannot and you have to be literally insane to understand it completely. Either that it or it is completely sane but human reason is flawed and that is why we cannot grasp it. Like why does someone pay $6 million for a T-shirt when that money could be put to a much better use. But then again we can hope that the seller of that T-shirt is going to be doing something better with all of that money. And then we have all of that money trickling down to others, too.
The Nehor Posted July 28, 2020 Posted July 28, 2020 6 minutes ago, Ahab said: Like why does someone pay $6 million for a T-shirt when that money could be put to a much better use. But then again we can hope that the seller of that T-shirt is going to be doing something better with all of that money. And then we have all of that money trickling down to others, too. Opportunity cost reasoning. Yeah, but purchases like that are usually about vanity and that gratification of the ego or vanity is why the purchase was made and not actual value ascribed to the purchase. Look to the Roaring 20s for indiscriminate spending and then destroying what it purchased just for the thrill. It got wild. Remember in Johnny Lingo when Mr. Harris first assumed Johnny Lingo paid all those cows for his wife as a tribute to his vanity just because he could and so that his boastfully spending so much would be remembered by all. "He is neither crazy or blind. He is just vain. Poor vain fool." Same concept. If you mean that in the Reagan "trickle down" sense that view has been largely discredited. The "rising tide lifts all ships" metaphor does not necessarily work in economics. It generally doesn't but there are exceptions. The irony is that the huge wealth gap is a large factor in what is holding back the economy while our activity continues to widen the gap.
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