Irish Economy and Budget Watch / / /Emergency Budget Announced for April 7th

cactus flower wrote:

Is it proper order for some people to live here, and other people to own three or four houses for their personal use ?

I'll take that in two parts, No I don't think it is in order for people to live on the street.

Yes, I think it's fine for people to won three or four houses.

Following on from the first part, can you think of any Free Market regime that does not have large numbers of homeless people ?

cactus flower wrote:

Is it proper order for some people to live here, and other people to own three or four houses for their personal use ?

Distortions exist in every market and it is impossible to get rid of all of them since the complexity of markets is beyond any individual's control, what we can do is reduce the level of homelessness to the lowest possible level. In even the most egalitarian and socially progressive societies, there exists problems to do with homelessness and it is a terrible thing but it is a fact of life.

What should be the case is that the vast majority participate in the mortgage market to buy a home, another significant percentage get rented accommodation and then another group beyond that are given houses by the council in which to live. Beyond that again, NGOs like the Simon Community and Focus Ireland can house even more people. It is impossible to ensure that everyone has a home. It is possible to ensure that the most amount of people have a home.

cactus flower wrote:

Following on from the first part, can you think of any Free Market regime that does not have large numbers of homeless people ?

I cannot think of any market regime that would not have homelessness without a price.

If there wasn't social housing, which is definitely a market distortion, there would be a lot more homelessness, wouldn't there ?

Ard-Taoiseach, I am convinced that you are too decent to really believe that we should leave social justice entirely to the vagaries of the market.

I would argue that's not entirely a market distortion, it is still a product on offer to those who wish to use it and doesn't represent an option to those also in the market who don't wish to avial of social housing.

But I would't say mine or AT's position is that it should be left to the vagaries of the market, since the market regardless of what form it takes is constructed by people and I believe people have a moral obligation not to see people homeless, hence organisations like the Simon Community which would exist in any reasonable free market conditions.

cactus flower wrote:

If there wasn't social housing, which is definitely a market distortion, there would be a lot more homelessness, wouldn't there ?

There is a strong possibility of it, but I would be in favour of a social housing model which allows people to buy back some or all of the homes from the council to start them on the property ladder. I don't see social housing as a distortion to the market but simply an entry point for some people who cannot arrange or afford a mortgage on their first home.

Quote :

Ard-Taoiseach, I am convinced that you are too decent to really believe that we should leave social justice entirely to the vagaries of the market.

Well, I don't in the same way I wouldn't leave it entirely to the vagaries of an unqualified Minister, a bureaucratic civil servant or a pious socialist movement. I think we need to strike a balance between the two with a strong emphasis on liberalism. People, in as many cases as possible, should own their own homes and we should do it in as liberal a way as possible.

cactus flower wrote:

If there wasn't social housing, which is definitely a market distortion, there would be a lot more homelessness, wouldn't there ?

Ard-Taoiseach, I am convinced that you are too decent to really believe that we should leave social justice entirely to the vagaries of the market.

Is there slack in the market which would allow governments to build socially without overly distorting the market? If you think of the new and second hand car market it's astonishing in variety and it seems like there is a lot of opportunity for free play with price. Maybe there isn't such excess in the housing market though.

By the way, the original installation of Fannie and Freddie happened in a market that was definitely not free.

cactus flower wrote:

Ard-Taoiseach, I am convinced that you are too decent to really believe that we should leave social justice entirely to the vagaries of the market.

Ard Taoiseach, yesterday.

You see, dencent people do believe in market freedom. They're not all evil puppy eating capitalist bastards like me. Infact the decent people are the ones who will makr such a market system work and make it so the social responsibilities of society will not be ignored.

cookiemonster wrote:

I would argue that's not entirely a market distortion, it is still a product on offer to those who wish to use it and doesn't represent an option to those also in the market who don't wish to avial of social housing.

But I would't say mine or AT's position is that it should be left to the vagaries of the market, since the market regardless of what form it takes is constructed by people and I believe people have a moral obligation not to see people homeless, hence organisations like the Simon Community which would exist in any reasonable free market conditions.

There's a massive amount of supported housing of different kinds in Ireland
- social housing - highly subsidised rents
- private rental funded by social welfare payments
- housing association housing supported by capital grants from the Department of the Environment
- mortage relief on tax
- first time buyers grants
- affordable housing subsidised by local authorities
- tax incentivised private housing

None of the people getting these forms of housing are on high enough incomes to buy a house on the open market.

Most European states have a lot more social housing than Ireland does.

cookiemonster wrote:

cactus flower wrote:

Ard-Taoiseach, I am convinced that you are too decent to really believe that we should leave social justice entirely to the vagaries of the market.

Ard Taoiseach, yesterday.

You see, dencent people do believe in market freedom. They're not all evil puppy eating capitalist bastards like me. Infact the decent people are the ones who will makr such a market system work and make it so the social responsibilities of society will not be ignored.

I'm quite sure that the Cookiemonster is a perfectly decent monster too, and has only been temporarily lead astray by the evil Gan-lee and A. Smith.

cactus flower wrote:

None of the people getting these forms of housing are on high enough incomes to buy a house on the open market.

Which is why it can be used as a sort of training ground for people to move onto the property ladder proper and buy and sell houses by themselves.

cactus flower wrote:

I'm quite sure that the Cookiemonster is a perfectly decent monster too, and has only been temporarily lead astray by the evil Gan-lee and A. Smith.

If you read the thinkings of Adam Smith, you'd realise that what we need more than ever is a good dose of his thinking. Between the Theory of Moral Sentiments and the Inquiry into the Nature and Cause of the Wealth of Nations, Adam Smith constructs a persuasive, comprehensive and well-qualified manifesto with which we can create effective economic policy. Adam Smith is a lodestar we can all set our thinking by.

cactus flower wrote:

I'm quite sure that the Cookiemonster is a perfectly decent monster too, and has only been temporarily lead astray by the evil Gan-lee and A. Smith.

I would not consider Adam Smith evil, and until you're read wealth I suggest you don't either. I very much urge you to read it.

And while I respect and admire Declan he has had no bearing on my economic stance.

You and Cookiemonster look just as cute as I imagined you both. Thankyou for engaging in this discussion on housing, a subject that I find endlessly interesting. I'll be off to bed now, but hope we can continue another time.

cactus flower wrote:

You and Cookiemonster look just as cute as I imagined you both. Thankyou for engaging in this discussion on housing, a subject that I find endlessly interesting. I'll be off to bed now, but hope we can continue another time.

Fáilte romhat aris! I'm also sure we can have an intellectual exchange on this subject again, it's extremely stimulating. Oíche mhaith agus codladh sámh!

These pictures are not of homeless people. They are lining up overnight or longer for tickets or to buy a hot item. Common occurence over here

cactus flower wrote:

Well, you buy a bunch of ingredients and a kitchen, you bake a cake, and sell it. Its the work of baking it that makes the difference between the price of the ingredients and what you get for the cake.

That's not really the case. Profit is the gap between what someone is willing to pay you for an item or service, and what it costs you to produce it. What you're talking about above is simply putting a value on your labour - if you want to run a business baking cakes, then you'll need to also factor in a whole load of other costs that are not actually related to making cakes - regulatory compliance, sales, administration, premises etc etc.

Auditor is partly right - profit is partly a hedge against loss. If I charge over what it costs me to make cakes (even including all overheads), then I can survive a few unsold cakes. It's also a source of investment in new premises, or experimental cakes, or cleaner ovens.

It's also the case that profit can be used to support the leisure of a business owner - so that you, as the owner of the business, can swan off and play golf.

All of these are possible without capitalism. What capitalism makes of profit is a reward for lending money, in addition to all of the above. If you have no money to set up your bakery, I can loan it to you, and you can pay me back at interest - and take the interest out of your profit. The more profit I believe you can make, the more willing I will be to 'capitalise' your business with a loan.

Does that make capitalists inherently evil? Not really - they have a particular good, and derive earnings from it by lending that good to others, in exactly the same way the peasant with the ox can profit from the ox by renting it to his oxless neighbours. Usually, they have earned the money they invest in the first place through taking risks. Nor is investing an activity without risk - in a sense, any capitalist enters a joint venture with the business he/she invests in (and many of them like to keep a very close eye on the investment, too). Of every ten investments, most will either fail or just wobble along - it's the good ones that pay for the bad, if you're lucky.

Mostly, like markets, capitalism is just a mechanism.

Your explanation Ibis does not explain why a person would pay you more for the cake than the costs of materials and other inputs (obviously including the ones you mention). The reason is that these things have been transformed by the labour that went into them. Thats what people pay for. The hedge against loss doesn't change that - that is just an averaging out of the labour input. For example, I have to set my fees to recoup the time I have spent/will spend on bidding for jobs that I may not get.

I don't think that good and evil come into this discussion, we are talking about an economic system here.

cactus flower wrote:

Your explanation Ibis does not explain why a person would pay you more for the cake than the costs of materials and other inputs (obviously including the ones you mention). The reason is that these things have been transformed by the labour that went into them. Thats what people pay for. The hedge against loss doesn't change that - that is just an averaging out of the labour input. For example, I have to set my fees to recoup the time I have spent/will spend on bidding for jobs that I may not get.

No - the reason they pay you more for the cake than it cost you to make it is because they are paying what it is worth to them. Not to you. As long as it is worth more to them than to you, you can make a profit.

Say making a cake takes 1 hour. You tot up your labour costs plus ingredients, and you come out with a figure of €15 for the cake. You offer it for sale at €20.

I look at the cake. I consider the hour it will take me to make the cake, and whether I would rather spend time making an equivalent cake or spend the €20 and have the cake right now.

The factors that will influence my decision include, but are not limited to:

1. whether I think I could make an equivalent cake - if I don't, I value your cake more
2. how long I think it would take me - the longer, the more I value your cake
3. how much I value my time - the more I value my time, the more your cake is worth to me
4. how much of a hurry I'm in - the more, the more I value your cake
5. how much of my budget €20 represents - the less, the more willing I will be to spend it
6. how pressing my desire for cake is!

Plus a variety of imponderables like how prestigious your cake is, the ambience of your shop, the pleasure of the transaction itself, whether the cake is a necessity or a treat.

Of course, you don't know all of these things, and I don't sit there and calculate them until I come up with a maximum figure I'm willing to pay for cake - all you can do is offer the cake for sale at a particular price, and see whether I buy it.

Your profit is almost entirely unrelated to your labour cost.

Ibis - price isn't an individual matter, it is set across the whole market which finds its averages and levels.

What I am saying is that profit is based on the surplus value added by labour - not "labour costs". In fact, the profit is the difference between the labour costs (and other costs) and what we charge for the item - but profit could not be accrued if value was not added through labour.

youngdan wrote:

These pictures are not of homeless people. They are lining up overnight or longer for tickets or to buy a hot item. Common occurence over here

You're absolutely right youngdan. I'd say its a long time since the US homeless have been able to afford boxes and covers.

cactus flower wrote:

Ibis - price isn't an individual matter, it is set across the whole market which finds its averages and levels.

The decision to set price at a particular level is entirely up to the individual seller, and the decision to buy at a particular price is entirely up to the individual buyer. That's part of what makes a 'free market' free.

cactus flower wrote:

What I am saying is that profit is based on the surplus value added by labour - not "labour costs". In fact, the profit is the difference between the labour costs (and other costs) and what we charge for the item - but profit could not be accrued if value was not added through labour.

Not at all - consider rents. Profit is unrelated to the value actually added by labour, and is instead based entirely on the perception of worth - just as much labour goes into a Dunnes Stores T-shirt as into a branded one - indeed, they're often the same T-shirt - yet the latter commands a premium entirely unrelated to the labour involved. How does your theory account for either rents or brand premiums?

**ibis posted above me

cactus flower wrote:

Ibis - price isn't an individual matter, it is set across the whole market which finds its averages and levels.

What I am saying is that profit is based on the surplus value added by labour - not "labour costs". In fact, the profit is the difference between the labour costs (and other costs) and what we charge for the item - but profit could not be accrued if value was not added through labour.

Are you saying that labour per se has or should have a value or price? Should that price be fixed to something (the calorie standard ??) or itself subject to the market? It's subject to the market now ...

Doesn't it make sense that what ibis says - that price is dependent on those things he mentions and on what someone is willing to pay for the product? I think ibis came close to mentioning that the producer themselves should be subject to a wage for their time and labour where he mentions the producer subsidising their lifestyle and golf habits etc. I don't think he said it explicitly. Are you saying that there should be a universal wage based on something and reflecting labour?

Auditor #9 wrote:

**ibis posted above me

cactus flower wrote:

Ibis - price isn't an individual matter, it is set across the whole market which finds its averages and levels.

What I am saying is that profit is based on the surplus value added by labour - not "labour costs". In fact, the profit is the difference between the labour costs (and other costs) and what we charge for the item - but profit could not be accrued if value was not added through labour.

Are you saying that labour per se has or should have a value or price? Should that price be fixed to something (the calorie standard ??) or itself subject to the market? It's subject to the market now ...

Doesn't it make sense that what ibis says - that price is dependent on those things he mentions and on what someone is willing to pay for the product? I think ibis came close to mentioning that the producer themselves should be subject to a wage for their time and labour where he mentions the producer subsidising their lifestyle and golf habits etc. I don't think he said it explicitly. Are you saying that there should be a universal wage based on something and reflecting labour?

I think CF is arguing the traditional Marxist labour theory of value, whereas I am championing the marginal utility theory of value.