stupid money ?

[DSGE]

Sort of correct, by good advertising , availability, convince ,..etc other qualities you probably can still do good setting the price a little high in some circumstances. ( look at the guy that made the pet rock he's a million are and do you think is product was worth as much as he obtained for it... Many people have done the equivalent of what he did and went broke or made no money/little money ... point is the reason why somebody makes it with a product or not has alot to do with public awareness and marketing it well.... I do agree alot of good products sell them selves but not always )

Plus what happens if somebody setup 2 companies one with really low prices one with higher then normal prices .. he could still manipulate people into buy stuff using psychology to some extent... obviously the smart person that knows this stuff can see thru it.... But still most people cann't.

Well we can prevent the market from adjusting to the competitive price if we interfere through the government to prevent competition. If somebody comes up with the idea for a pet rock, and the government says "okay, nobody else except this guy is allowed to produce pet rocks for 20 years", that prevents people from entering the pet rock business and bringing the price down to near what it costs to make a pet rock. So if you don't think that's fair, you can think about how you'd like to reform intellectual property laws.

As to the, "manipulate people to want things using psychology", how exactly do you plan to stop that? How do you tell if somebody has been "manipulated" into wanting something or if they legitimately want it? Even if they have been manipulated, they do want it now. Are you gonna stop them from getting it? Maybe you want to make "manipulation" illegal? How do you tell what's manipulation and what's just plain advertising? This isn't something you can deal with.

Also, again, none of this is related to a monetary economy. All this happens in a barter economy as well.

Point being the money system is not fair and is biased to the rich.

Except nothing you have said at all relates to money. Money is the "medium of exchange". All you've been talking about so far is exchange. Exchange happens in a barter economy; that's what barter is.

... in that the buyer can hold out for the guy that is going to pay the most.
Ya, it works both ways to some extent but more so favors the seller then the buyer specially when the buyer has no frame of reference on what a fair price is.

Look, competitive markets lower the price to near the cost of producing the good. What you'd call a "fair" price. Deviations from the "fair" price happen because of deviations from competition. So our goal should be to promote competition within the market place, if you care about fair prices.

The only fair way is to give the people a frame of reference to a price range ... in the barter system it would be equivalent to making people aware what it takes to make or have a particular product manufactured (i.e time, resources,...etc some sort of paper listing what was done in an understandable way that the majority of people will know how to interpret. ( so they can base on that how much their range /value of the product it is to them ) That will even out the playing ground.

The price falls to that level automatically in competitive market. If there's a deviation from competition, it doesn't matter if people are aware of the cost of producing things. The supply will be restricted which will raise the price, for a given demand.

These are all points about the way markets function. If you want to turn the thread into a discussion on the price mechanism, fair enough. But do you recognise that none of this has anything to do with money? Prices exists in any economy. How they're set is not at all related to access to money, the medium of exchange.

 

[Wedn]

Oh! you were talking about the medium of exchange? I thought you were talking about price theory; and monetary theory, and monetary policy, and the effect of money on the real economy, and what happens when money becomes wealth, and how wealth affects the progress of economic activity going forward; and how money works in an economy. I didn't know the 'medium of exchange' is a discipline, or discourse separate from what an economy is really all about, which is production and consumption- something that does not involve political economy, the distribution of resources and effects on people's lives... perhaps monetary theory as a discussion of medium of exchange only involves whether money is paper or gold? and nothing to do with the inevitable transition of medium of exchange into Capital? Are you being serious?

 

[DSGE]

Oh! you were talking about the medium of exchange? I thought you were talking about price theory;

It sort of turned into that eventually.

and monetary theory, and monetary policy,

Which is about money as the medium of exchange...

I didn't know the 'medium of exchange' is a discipline, or discourse separate from what an economy is really all about, which is production and consumption- something that does not involve political economy, the distribution of resources and effects on people's lives... perhaps monetary theory as a discussion of medium of exchange only involves whether money is paper or gold? and nothing to do with the inevitable transition of medium of exchange into Capital? Are you being serious?

Monetary theory is theory of the medium of exchange, money. What do you mean "inevitable transition of medium of exchange into capital"? Money isn't a factor of production. It doesn't get turned into capital goods. It acts as a medium through which exchange of any goods and services is facilitated. Nobody is talking about the production of goods, so we don't need to discuss capital. We're talking about the exchange of goods.

 

[itfitzme]

I am curious when the government can print more money or another words in what conditions are the government/treasury allowed to make more money.

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

DSGE covered the conditions with;

"The mandate the Federal Reserve has in the Federal Reserve Act is "stable prices and maximum employment". They have complete control over one particular kind of money, called High Powered money (notes and coins in circulation plus bank reserves), to achieve this goal. The Fed very recently - around January 25th this year - announced an explicit target. They feel that the best way to achieve their dual mandate is to target 2% inflation over the medium term."

That is as good as I've found.

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

I think a more fundamental question is how the gov't "prints" new money. I've looked for one single comprehensive source for this. The key terms are "print","mark-up","inject", and "create". It seems important to know all of the ways that the money supply increases.

One answer that is given when the words "print money" is used is that the Treasury prints new bills to exchange for worn out bills. That wasn't what I was looking for.

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

I present this in the form of a statement, rather than a bunch of questions, because I find that it doesn't matter either way. There is always someone happy to take a statement and say, "That's wrong" then proceed to explain what a question would have elicited anyways. Just as well, trying to craft a question that focuses towards the point requires setting it up anyways, which is just the statements with a "?" after all of it. So, it's just easier to simply make all the statements. Feel free to add new information.

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

What I've cobbled together is that the Federal Reserve increases the money supply by increasing the monetary base through open market operations, changing reserve requirements, loaning money through the discount window, and quantitative easing. I can find no other method. This increases reserve bank reserves so they can loan more money and increases the money for private sector businesses by taking financial assets off their hands. At some point, those financial assets come due and are returned to the Treasury, which then reduces the money supply "on the back end", or reduces the money supply where those reserves increases are loans that require they be marked back down again. I am looking for straight up reserve bank markups without them being loans and anything like the fabled "helicopter drop", where the Fed somehow sees that the money supply is increased on the "demand deposit" side of anything. If anyone can, I'd sure appreciate it.

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

Wiki, the source of all that is known, has a number of topics. The descriptions are intended to be globally accurate and it seems most central banks have the same processes as the U.S. Federal Reserve Bank. They do detail specific difference between some countries and provide details the U.S. system.

Money creation - Wikipedia, the free encyclopedia
Quantitative easing - Wikipedia, the free encyclopedia
Open market operation - Wikipedia, the free encyclopedia
Monetary base - Wikipedia, the free encyclopedia

My attempt is to condense all that to something that is both accurate and precise.

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

Open market operations involve the Federal Reserve by buying and selling government securities, or other financial instruments on the open market. "The central bank goes to the open market to buy a financial asset such as government bonds, foreign currency, gold, or seemingly nonvolatile (until the 2008 financial fallout) MBS's (Mortgage Backed Securities)." "To pay for these assets, bank reserves in the form of new base money (for example newly printed cash) are transferred to the seller's bank and the seller's account is credited. " The best detailed interpretation that I can get is that this typically involves the Federal Reserve purchasing those financial assets from banks by marking up their reserve account. Though, a more comprehensive statement is "These trades are made with a group of about 22 (currently 18 as an immediate aftermath of 08/09 credit crisis) banks or bond dealers who are called primary dealers"

QE, or quantitative easing is essentially the same as open market operations with the exception that the Federal Reserve includes "purchasing assets of longer maturity than only short term government bonds." "This is distinguished from the more usual policy of buying or selling government bonds ... A central bank implements quantitative easing by purchasing financial assets from banks and other private sector businesses with new electronically created money."

Of course, banks can simply borrow money from the Federal Reserve at the discount window at the discount rate.

More specifically, "The US Federal Reserve held between $700 billion and $800 billion of Treasury notes on its balance sheet before the recession. In late November 2008, the Fed started buying $600 billion in Mortgage-backed securities (MBS). By March 2009, it held $1.75 trillion of bank debt, MBS, and Treasury notes, and reached a peak of $2.1 trillion in June 2010. Further purchases were halted as the economy had started to improve, but resumed in August 2010 when the Fed decided the economy was not growing robustly. After the halt in June holdings started falling naturally as debt matured and were projected to fall to $1.7 trillion by 2012. The Fed's revised goal became to keep holdings at the $2.054 trillion level. To maintain that level, the Fed bought $30 billion in 2–10 year Treasury notes a month. In November 2010, the Fed announced a second round of quantitative easing, or "QE2", buying $600 billion of Treasury securities by the end of the second quarter of 2011"

Much of, or all of, this then relies on the fractional reserve banking system and the process of the money multiplier to increase the money supplies of M1, M2, M3(obsolete), and MZM through a cascade of loans. "First, the central bank introduces new money into the economy (termed 'expansionary monetary policy') by purchasing financial assets or lending money to financial institutions. Second, the new money introduced by the central bank is multiplied by commercial banks through fractional reserve banking; this expands the amount of broad money (i.e. cash plus demand deposits) in the economy so that it is a multiple (known as the money multiplier) of the amount originally created by the central bank."

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

That is everything that I can find. It seems to imply two underlying processes that are used together in each action. One is the increase in bank reserves that allows them to loan more money. The second is the exchange of financial assets like T-Bills which puts spendable money into the demand account of private sector businesses.

 

[sam111]

As to the, "manipulate people to want things using psychology", how exactly do you plan to stop that? How do you tell if somebody has been "manipulated" into wanting something or if they legitimately want it?

Not get rid of it completely just inform the buyers of what the raw cost / average work effort it is to produce standard products in an easy understandable way.
That way they have a frame of reference to base their decision more accurately on.
Then they can use that and how much they value the product to make the final decision on how much money their willing to give for it.

Hopefully your not a marketer/seller of products because the above statements will probably piss alot of those people off.
Why , because it will cut down on how much they can screw the customer in alot of cases.

I agree with most of what you are saying about and I know we are getting into many different topics money , price theory ,...etc But they are all related very closely with one another... and in alot of ways depend on one another .

 

[Wedn]

Monetary theory is theory of the medium of exchange, money. What do you mean "inevitable transition of medium of exchange into capital"? Money isn't a factor of production. It doesn't get turned into capital goods. It acts as a medium through which exchange of any goods and services is facilitated. Nobody is talking about the production of goods, so we don't need to discuss capital. We're talking about the exchange of goods.[/QUOTE]

It might be helpful if everyone would think about money a little deeper; 'medium of exchange' is but one aspect of money, it is not the comprehensive definition. Money as an economic entity is much more complex than that... Money is also a 'store of value' and it is in this sense that money morphs into Capital. Now, gold bugs (among others) will state that only money backed by (that is, pegged to) hard assets like precious metals is capable in its role as 'store of value' but this is nonsense based on a complete lack of understanding of what money really is in its multiple role manifestations. All money that functions as a medium of exchange will have a store of value depending on many factors- but Capital is not just cattle, or buildings, or machinery, it is something that can include these as constituent elements, but it is something of itself entirely different- and money, yes- paper money and electronic credits are also elements which build Capital and prosecute its power over the economy at large. Capital is the most important role money plays once economies have developed sufficiently based on its (Capital's) creation.

 

[DSGE]

As to the, "manipulate people to want things using psychology", how exactly do you plan to stop that? How do you tell if somebody has been "manipulated" into wanting something or if they legitimately want it?

Not get rid of it completely just inform the buyers of what the raw cost / average work effort it is to produce standard products in an easy understandable way.
That way they have a frame of reference to base their decision more accurately on.
Then they can use that and how much they value the product to make the final decision on how much money their willing to give for it.

So you'd want like, a government watchdog listing estimated costs of various goods? That seems like it'd be very expensive for very little benefit. When I make my decisions, and I assume most people do this, I don't think about all the costs of production or the "fair price" that "should" prevail. I ask myself this "Do I want this good enough to pay this price for it?". There may be a few people who find out "What?!! These shoes cost 10 cents to make! Fuck this!". But at the end of the day, that doesn't really factor into most decisions.

 

[DSGE]

It might be helpful if everyone would think about money a little deeper; 'medium of exchange' is but one aspect of money, it is not the comprehensive definition.

It's the most important one. The remaining characteristics are "store of value" and "unit of account". Money is not the only store of value, and the unit of account isn't especially interesting. It's the medium of exchange part that makes interesting things happen.

Money as an economic entity is much more complex than that... Money is also a 'store of value' and it is in this sense that money morphs into Capital. Now, gold bugs (among others) will state that only money backed by (that is, pegged to) hard assets like precious metals is capable in its role as 'store of value' but this is nonsense based on a complete lack of understanding of what money really is in its multiple role manifestations. All money that functions as a medium of exchange will have a store of value depending on many factors- but Capital is not just cattle, or buildings, or machinery, it is something that can include these as constituent elements, but it is something of itself entirely different- and money, yes- paper money and electronic credits are also elements which build Capital and prosecute its power over the economy at large. Capital is the most important role money plays once economies have developed sufficiently based on its (Capital's) creation.

Anything that stores value can be called "capital". Money is just a place holder for real goods and services. In a non-monetary economy, there's still capital. The introduction of money doesn't drastically change anything related to capital. It changes the way goods and services are exchanged. That's why nobody is talking about capital. Because it's not relevant to money.

 

[Wedn]

Money as an inert medium of exchange is not what monetary theory and monetary policy is about; The people at the Fed wake up every day thinking about money as Capital- not money as a medium of exchange; money exercises its full range of power only as Capital, and this is what the Fed seeks to manage so as to influence its constant unequaled power and weight over all economic activity across nation states and the globe. And Price Theory? This always takes care of itself as long as markets are in equilibrium- which they never are- except in some ideal model created by Quantic types.

 

[DSGE]

Money as an inert medium of exchange is not what monetary theory and monetary policy is about;

It is, actually. That's the unique thing about money. It's why we have money. The only difference between a barter economy and a monetary economy is that in a monetary economy we have money as the medium of exchange. It's also a store of value, though not a very good one because of inflation and it's not interest bearing; and a unit of account, which just makes our lives a bit easier but isn't especially interesting.

The important thing money does is reduce the number of "coincidence of wants" that need to occur from two, in a barter economy, to one. It does that through acting as the medium of exchange.

The people at the Fed wake up every day thinking about money as Capital- not money as a medium of exchange; money exercises its full range of power only as Capital, and this is what the Fed seeks to manage so as to influence its constant unequaled power and weight over all economic activity across nation states and the globe. And Price Theory? This always takes care of itself as long as markets are in equilibrium- which they never are- except in some ideal model created by Quantic types.

"money exercises its full range of power only as capital"

What? That doesn't make any sense. It's "capital", whatever you're defining that to be, because it's a store of value. So why do we have monetary theory? Why don't we have T-bill theory, or gold theory, wheat theory, or house theory, or iron ore theory, or oil theory, or used car theory? Money isn't interesting as a store of value because loads of things are a store of value! Being a store of value is not unique to money. Being the medium of exchange is. That's why money gets its own "monetary theory" and iron ore doesn't.

 

[sam111]

So you'd want like, a government watchdog listing estimated costs of various goods? That seems like it'd be very expensive for very little benefit. When I make my decisions, and I assume most people do this, I don't think about all the costs of production or the "fair price" that "should" prevail. I ask myself this "Do I want this good enough to pay this price for it?". There may be a few people who find out "What?!! These shoes cost 10 cents to make! Fuck this!". But at the end of the day, that doesn't really factor into most decisions.

Wrong! O, So Wrong you are.

I know tons of people trying to get the lowest prices on an item. As well as search for what a reasonable price should be based on going to many places... but with different marketing schemes this makes it very time consuming and sometimes impossible to get an approx. of what a fair price is.

I wish everybody had the lugger of just going out and getting what they want never have to worry about prices like you

And you think it would cost a ton to list on an item/ by an item the break down of what the raw material is , time ,...etc is hard to do.... and in the process you would create jobs for people to do . Like analysis how hard this product was to create at some level and calculate the figures.... Of course everybody would have to adhere to a proper standard / method of calculating their figures so they give a frame of reference.
(if I remember correctly are utility bills list somewhat of a break down the only thing they don't factor in is time/effort costs and a convinent way of understanding what this means to a layman.... luckly I don't have that problem in this case)

Cann't see anything bad about this in any way.
Not telling anybody to change prices or advertising schemes just telling you to give the customers a frame of reference then see what happens.
The the business are going to bitch about how unfair that would be ... sure informing what the price range truely should be would be totally wrong ... it would cut are profit by bullshit manipulation ( honestly I don't know how marketers can live with themselves taking away money from the elderly who don't know better , or the younger kid that don't know better) ...

tough shit for the marketer
Don't get me wrong I am not out to get marketers either... just want to make the playing ground fair.

 

[DSGE]

So you'd want like, a government watchdog listing estimated costs of various goods? That seems like it'd be very expensive for very little benefit. When I make my decisions, and I assume most people do this, I don't think about all the costs of production or the "fair price" that "should" prevail. I ask myself this "Do I want this good enough to pay this price for it?". There may be a few people who find out "What?!! These shoes cost 10 cents to make! Fuck this!". But at the end of the day, that doesn't really factor into most decisions.

Wrong! O, So Wrong you are.

I know tons of people trying to get the lowest prices on an item. As well as search for what a reasonable price should be based on going to many places... but with different marketing schemes this makes it very time consuming and sometimes impossible to get an approx. of what a fair price is.

I wish everybody had the lugger of just going out and getting what they want never have to worry about prices like you

And you think it would cost a ton to list on an item/ by an item the break down of what the raw material is , time ,...etc is hard to do.... and in the process you would create jobs for people to do . Like analysis how hard this product was to create at some level and calculate the figures.... Of course everybody would have to adhere to a proper standard / method of calculating their figures so they give a frame of reference.

Cann't see anything bad about this in any way.
Not telling anybody to change prices or advertising schemes just telling you to give the customers a frame of reference then see what happens.
The the business are going to bitch about how unfair that would be ... sure informing what the price range truely should be would be totally wrong ... it would cut are profit by bullshit manipulation ( honestly I don't know how marketers can live with themselves taking away money from the elderly who don't know better , or the younger kid that don't know better) ...

tough shit

I didn't say I don't search for the best price. Obviously everybody does that. I'm saying that knowing how much an item cost the producer to make doesn't factor into my decision to buy the item. I care about the price relative to how much I want it. If I go to buy a pair of shoes, I try to find the best price I can. Say the lowest priced pair of shoes I want is $100. If I find out that there's $5 worth of material in them and 2 hours of labour, that isn't going to make me stop wanting the shoes or stop being willing to pay for them. Obviously I want the cheapest shoes I can get, but knowing how much they cost to make doesn't lower the price. Competition among shoemakers lowers the price. At the end of the day, knowing about production costs doesn't factor into my decision. My decision is based on: "Am I willing to pay this price for this pair of shoes".

Yeah it's costly to figure out how much the factors of production cost and figure out how much labour went into them for a million goods and services. But no, getting people to do that doesn't "create jobs". It depends: if this is a private entity that does this; if it's a service individuals who use the service pay for and the company is able to exist, then those are productive jobs. If the government sets it up and taxes people to pay for it, it's not "creating jobs". It's destroying productive jobs and replacing them with less productive jobs. On top of which, it's taking real resources away from people to pay for a service they don't want.

 

[Wedn]

DSGE, thank you for the discussion.
But I am surprised by your point of view.
What is used to create new large scale ventures in Commerce? Only history can answer the question adequately:
It is Capital. What is the original source of Capital? It is land. How is land changed into Capital? By creating Private Property through Politics and Law. What else must happen for land to become Capital? It is not just a store of value, because value can be a vague subjective thing- rather, it is a concrete resource which may be transformed through labor into a productive asset- agriculture, rent, etc.; this means food for the hungry, and a place to live-
real value, not subjective...
What happens next? A class of people emerge who produce manufactured goods, and a class emerges to handle banking- all on a small scale, these people make money (the medium of exchange) on the sale of their product (or service); but the money is not used further as only a medium of exchange, it is saved and as it grows to a large sum- it is metaphysically transformed into Capital- and this Capital does not diminish but grows because it becomes the source of Credit; and Credit is issued for new ventures into new Industrial Processes; and the cycle repeats but on an ever larger scale.
But what of the large landowners- they collect rent and save the money; they too come to have Capital in the full sense- and all the options which come with money as Capital and not simply the medium of exchange.
Capital is not just valuable goods- valuable goods are commodities- is money a commodity?

 

[sam111]

I didn't say I don't search for the best price. Obviously everybody does that. I'm saying that knowing how much an item cost the producer to make doesn't factor into my decision to buy the item. I care about the price relative to how much I want it. If I go to buy a pair of shoes, I try to find the best price I can. Say the lowest priced pair of shoes I want is $100. If I find out that there's $5 worth of material in them and 2 hours of labour, that isn't going to make me stop wanting the shoes or stop being willing to pay for them. Obviously I want the cheapest shoes I can get, but knowing how much they cost to make doesn't lower the price. Competition among shoemakers lowers the price. At the end of the day, knowing about production costs doesn't factor into my decision. My decision is based on: "Am I willing to pay this price for this pair of shoes".

Yeah it's costly to figure out how much the factors of production cost and figure out how much labour went into them for a million goods and services. But no, getting people to do that doesn't "create jobs". It depends: if this is a private entity that does this; if it's a service individuals who use the service pay for and the company is able to exist, then those are productive jobs. If the government sets it up and taxes people to pay for it, it's not "creating jobs". It's destroying productive jobs and replacing them with less productive jobs. On top of which, it's taking real resources away from people to pay for a service they don't want.

Well, I still think your wrong.
Your going to tell me that if that service was provided it would not make business set their prices more evenly? Of course it would since any reasonable person would easilly know a frame of reference to look for on a particular item.

Now weather how he values it comes it more to one person as to another depends on how much he values that item. That means some people like your self wouldn't care if he got the lowest price just a reasonable one. ( which I agree with mostly)

Point being I am talking about how do you know you got a reasonable price... your baseing it on how you value it. So I value an airplane for like a $1 does that mean I should beable to buy one for a $1. I base value my nutrition more then any money value does that mean I should give everything for a grain of rice. No,...


The point is not so much with with prices but a frame of reference where people know how much a fair price range for a product should be.

I think you are just totally wrong with all of what you said in those "" for the most part.

 

[DSGE]

DSGE, thank you for the discussion.
But I am surprised by your point of view.
What is used to create new large scale ventures in Commerce? Only history can answer the question adequately:
It is Capital. What is the original source of Capital? It is land. How is land changed into Capital? By creating Private Property through Politics and Law. What else must happen for land to become Capital? It is not just a store of value, because value is a vague subjective thing- rather, it is a concrete resource which may be transformed through labor into a productive asset- agriculture, rent, etc.; this means food for the hungry, and a place to live-
real value, not subjective...
What happens next? A class of people emerge who produce manufactured goods, and a class emerges to handle banking- all on a small scale, these people make money (the medium of exchange) on the sale of their product (or service); but money is not used as a medium of exchange, it is saved and as it grows to a large sum- it is metaphysically transformed into Capital- and this Capital does not diminish but grows because it becomes the source of Credit; and Credit is issued for new ventures into new Industrial Processes; and the cycle repeats but on an ever larger scale.

But what of the large landowners- they collect rent and save the money; they too come to have Capital in the full sense- and all the options which come with money as Capital and not simply the medium of exchange.
Capital is not valuable goods- valuable goods are commodities- is money a commodity?

Okay so some words are getting conflated here so I'm gonna try and sort out definitions. My field is econ, not finance, so if it'd be alright can we use the econ terminology?

Capital: Tools and machines that augment labour. An input in the production process.

Income: The part of an exchange which you receive. The most common form is income from trading your labour for goods and services or the ability to buy goods and services.

Savings: Income that isn't used for consumption. Is used to fund investment in capital goods. Also called "financial capital" (that's where some confusion is. People in finance say capital instead of savings)

Money: The medium of exchange. Rather than trading goods and services directly for other G&S, we trade G&S for money and use that money to buy other G&S.

You've kind of merged capital and savings into "Capital", both of which are important for the reasons you mentioned, but it's slightly confusing.

So if you go through your post and replace instances of the word "money" with "income" or "wealth", then that makes sense to me. Most people use them interchangeably, but in econ they're not the same.

Maybe that clears up some of the miscommunication?

 

[DSGE]

I didn't say I don't search for the best price. Obviously everybody does that. I'm saying that knowing how much an item cost the producer to make doesn't factor into my decision to buy the item. I care about the price relative to how much I want it. If I go to buy a pair of shoes, I try to find the best price I can. Say the lowest priced pair of shoes I want is $100. If I find out that there's $5 worth of material in them and 2 hours of labour, that isn't going to make me stop wanting the shoes or stop being willing to pay for them. Obviously I want the cheapest shoes I can get, but knowing how much they cost to make doesn't lower the price. Competition among shoemakers lowers the price. At the end of the day, knowing about production costs doesn't factor into my decision. My decision is based on: "Am I willing to pay this price for this pair of shoes".

Yeah it's costly to figure out how much the factors of production cost and figure out how much labour went into them for a million goods and services. But no, getting people to do that doesn't "create jobs". It depends: if this is a private entity that does this; if it's a service individuals who use the service pay for and the company is able to exist, then those are productive jobs. If the government sets it up and taxes people to pay for it, it's not "creating jobs". It's destroying productive jobs and replacing them with less productive jobs. On top of which, it's taking real resources away from people to pay for a service they don't want.

Well, I still think your wrong.
Your going to tell me that if that service was provided it would not make business set their prices more evenly? Of course it would since any reasonable person would easilly know a frame of reference to look for on a particular item.

No. A service which would make businesses lower their prices is a market; some medium through which we can see available prices and easily go to another producer if they offer a lower price. Those already exist.

The consumer knowing how much production costs doesn't lower the price. If a market isn't competitive and a store is able to charge high prices, it doesn't matter if a consumer knows that they're making excess profits. The only way a consumer has control over the price they pay for a good is by being able to take their business elsewhere. Nothing else matters. As I said above, a place where you're able to locate competitors and their prices is called a "market", and those already exist. And we're constantly making them better and introducing more competitors to people. Hell, the internet has opened up a world of competition. Literally a whole world of competition. 10 years ago if I wanted to buy a guitar I'd have to go into town and pay through the nose for one. There wasn't much room to move on the price since they knew I couldn't go anywhere else. Now I can jump on ebay and get one loads cheaper shipped from overseas.

Point being I am talking about how do you know you got a reasonable price... your baseing it on how you value it. So I value an airplane for like a $1 does that mean I should beable to buy one for a $1. I base value my nutrition more then any money value does that mean I should give everything for a grain of rice. No,...

I don't think you're quite getting the point. The point I'm making is that if I knew how much it cost to make something, that would not affect the price I could buy it at. I want the lowest price. I'm going to look for the lowest price. Knowing how much it cost to make doesn't help me. It doesn't change the fact that I'm gonna look for the lowest price. If the lowest price I can find is still too high, knowing the cost to make it doesn't lower the price. Only competition does.

 

[Wedn]

Yes DSGE. Thanks for your serious discussion. Your attention to specific definitions is the right thing to do for the sake of effective communication. Okay- I can see why it is important to limit how we use language in a specific field like economics and finance and accounting and such.

But- please be patient with what I am about to say, and I will attempt to say it clearly. Certainly the denotative and connotative meaning of terms change over time and according to the disciplines they are being deployed against; of course, mathematics is the preeminent language for the sciences, but particularly the history of the calculus shows us the sometime necessity of using multiple expressions for a single object or process, and this necessity arose of different uses.

So, to be too deferential to a term might mean to make of a concept the slave to a word. For example, What is 'savings'? "income that isn't used for consumption". Certainly savings is money not spent (on consumption) right away, but put aside; but is it put aside as investment, as in deploying the money for new production- as in certain equities? or is it placed in Treasuries as credit to the US? or is it hoarded in the form of gold? All of these could be called investments, but do they have a comparable economic result? Perhaps it could be placed in a mattress in a deflationary environment. These choices by large numbers have macroeconomic consequences.

Money as "the medium of exchange": yes money plays that role- it is exchanged for goods & services; and also it is issued as credit creating a multiplier effect; and it is exchanged for gold or stuffed into a mattress creating a hoarding effect;

but these last two move money into a new extraordinary realm:
money is the measure of wealth, even when the bulk of assets may be land, or factories, or mineral resources, etc, because they are valued or priced in terms of money;
and finally money (as savings) is used to invest in capital goods (financial capital) i.e. invested to create new production, or just held as cash (bank deposits) by management-

but the thing missing in all this is the societal wide impact of the influence (power) which money holds in its aggregate form of measured wealth of all asset classes (Capital as over and against financial capital) over the economic process at large and on the political process- hence it is the real and culpable determinant of history.

Money become Capital- becomes the dominant cultural artifact of our civilization.

 

[sam111]

Agreed with most of it but I think we are just getting down to beliefs more as opposed to definitions now.

And I belief it would be more fair to have a frame of reference implemented into priceing things. Not saying the prices have to conform to any standard just saying it will make the playing ground alot more even and fair interms of the buyer/seller. You may believe differently but their is no way your going to change my mind on that. At least of course for large items , like cars , houses ,....etc where their is essentially no frame of reference to things

I agree some items people can pretty much get a rough estimate / frame of reference on what the a reasonable price range should be.

 

[Wedn]

I have taken your thread as a launching pad to talk about money in a use that departs from your original and particular concern; this is a way to expand discussions... but now, turning to your concerns with money and price: the best way in my view to consider fair price is to look at things from a big picture point of view, and then the individual case falls into place; first, a business enterprise engaged in commerce does not operate isolated from the larger economy, there is a good or service offered (which I will call a commodity) and there is a supply of this commodity (which can be quantified). Also, there is, if the commodity offered has some use value, a demand for it (which is also quantifiable). If the quantity which represents the supply or availability of this commodity is large, this tends to suppress the price for it- no matter how a given individual might personally value it; and if the demand quantity (the number of people who actually want it) is small- then you have before a commodity which cannot command a very high price. And of course the inverse is true. Price is determined in the aggregate and changes according to the factors of supply and demand. But life is never the same as a mathematical model- no matter how sophisticated the model- and one can always expect individual (but not unique) situations where a commodity is sold for what you would call a unfair price - the history of our system here in America and the world over is full of price cartels, coercion, and false representation such that many commodities are priced unfairly according to anything like a moral standard. I have a real problem with economic modelling- but in cases where it is used (and represented as reality) there can be no unfair price- the fact that the commodity is sold at the given price proves the price is fair- but that is only a model- not reality.
warm regards to you,
Wedn

 

[itfitzme]

Agreed with most of it but I think we are just getting down to beliefs more as opposed to definitions now.

And I belief it would be more fair to have a frame of reference implemented into priceing things. Not saying the prices have to conform to any standard just saying it will make the playing ground alot more even and fair interms of the buyer/seller. You may believe differently but their is no way your going to change my mind on that. At least of course for large items , like cars , houses ,....etc where their is essentially no frame of reference to things

I agree some items people can pretty much get a rough estimate / frame of reference on what the a reasonable price range should be.

There is a frame of reference. I thought someone had mentioned it, but they may not have framed it as such. It is the price that would exist if the market was a perfectly competative free market with perfect information, and no barriers to entry or economies of scale.

Now, it's important to understand that a CEO's salary is not profit. Wages are not profit. The owner's salary is not profit. These are expenses. Profit is what is left over after all expences and taxes are paid. Profit is what pays the dividends to the stock holder.

In a perfectly competative free market with perfect information, and no barriers to entry or economies of scale, there is no profit. If there is any profit, someone else will start a business and profit will drop until every companie just makes expenses. There is, of course, no way to define what the market would be if it were a perfectly competative free market with perfect information, and no barriers to entry or economies of scale. But, that it has profits tells us that it isn't.

And, the history of the Supreme Court includes a history of anti-trust or anti-monopoly laws that make monopolies illegal. The reason is that monopolies form naturally out of a market with barriers to entry and economies of scale. And monopolies enjoy a position where they can create artificial shortages of supply and drive up prices. Even ologopolies can act as a monopoly. The can, and do act, in a manner such that they short supply to drive up prices. There is, for that matter, a sweet spot in pricing where quantity times price maximizes.

The devil is always in the details.

If, for instance, a company can come up with a high demand pair of basket ball shoes and reap an awesome profit due to advertizing, that's not really so much due to barriers to entry or economies of scale. It may be that they are shorting supply, it's done all the time with limited editions. It's not the entire market and there are substitutes.

So it does get to be a bit of an issue determining what is an ologopoly, a monopoly, or just one profitable company. Legal cases that went to the supreme court considered this issue. In the case of Alcoa, the manufacturer of aluminum, they did decide they had a monopoly. It wasn't for any fault of their own, just they had a patent of a better process and by the time the patent ran out, nobody was left. In other cases, like when gasoline production first began with Chevron service stations being built around the country, they got slapped with anti-trust suit and price fixing to drive out smaller privately owned service station.

I was reading, somewhere, perhaps Australia, the proposal to give tax breaks to companies that were not in high profit markets. It's the equivalent to taxing profits, just a back door way in.

I'm not sure that it really matters though. Prices rise to consume all income, if output doesn't. I am just not sure if a market amassing record profits isn't simply choking of the money supply to the point that they are effectively driving down their own prices in the long run, or choking of other markets. My concern is the latter. And, my experience tells me that if both are possible, then both happen and comes to rest at some balance.