Exilian
Art, Writing, and Learning: The Clerisy Quarter => Discussion and Debate - The Philosopher's Plaza => Topic started by: Clockwork on February 07, 2015, 01:06:41 PM
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This isn't technically news but recent events are reinforcing a point. Miliband is a tool.
"We support businesses but will also tax them into oblivion while simultaneously expecting them to bend over and take this extortion and not move to the Maldives" Literal quote from the douchebag himself.
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I don't think they're going to exactly be hit by oblivion or extortion - though I think you're right that businesses scuttling overseas is a very real worry and I'd like to hear better proposals for how we can stop that occurring.
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Stopping it occurring is simple in principle. Don't tax them as high. They're way more inclined to stay if tax was reasonable.
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The downside of that being that we then don't get revenues from them. :P
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I'd think we'd get more from businesses that then come over here because we have reasonable tax. Also for some reason people think its ok to steal from big businesses anyway which kinda baffles me. If upwards of 50% tax isn't theft then people have issues.
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I dunno; I'd argue, on the other hand, that once a business or individual is making what they need from their business, and then some, then making excessive amounts of money on top of that is just extortion via the marketplace. I don't think it's in any sense "theft" to get businesses or people whose income is mostly unearned to pay back into the system that:
- Trains the workforce that's making them the money in the first place
- Protects them from having their assets or intellectual property stolen and provides a secure means of resolving disputes in contracts
- Prevents danger from large-scale social unrest by ensuring we don't have too many people living in extreme poverty
- Provides much of the infrastructure their business relies upon for no up-front charge (roads, power, rail, etc etc)
- Keeps their workforce in a good and healthy condition to work
Given all that, I have no problem with people being taxed at higher percentages on income they earn above a certain point. They don't need the money, and other people objectively need it more; not only that, but the state can do things with it that individuals can't - efficiently improving infrastructure and living conditions which ultimately leads to higher total productivity, a bigger customer base, and eventually therefore higher earnings.
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How could that be extortion? They make money from people willing to part with it for the good or service offered which is how a free market works well. If something is deemed too expensive, it won't be bought and will become cheaper.
The system does no such things in particular for higher earning businesses than it does for low income ones. Why should those earning more be subsiding the rest? You feel like that have less right to their own money because other people need it more? Why try and be that person then? Whats the point in raising yourself from the lowest where its okay to be average because somebody that has a passion to do what they do is successful and has to subsidise you?
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How could that be extortion? They make money from people willing to part with it for the good or service offered which is how a free market works well. If something is deemed too expensive, it won't be bought and will become cheaper.
Unless its a necessary commodity like food, water, energy, fuel, transport, housing etc. You know, the sort of things that low earners have to spend the vast majority of their money on.
The system does no such things in particular for higher earning businesses than it does for low income ones. Why should those earning more be subsiding the rest? You feel like that have less right to their own money because other people need it more? Why try and be that person then? Whats the point in raising yourself from the lowest where its okay to be average because somebody that has a passion to do what they do is successful and has to subsidise you?
Well I'm pretty sure Jubal is not advocating complete wealth redistribution or communism so there's still plenty of obvious benefit to earning more. Even if taxes were to be raised for higher earners they would still be higher earners and would still be a hell of a lot more financially secure than middle or low income earners.
If you think the current system doesn't favour higher earning businesses then why do you think the markets are dominated by a very small percentage of these large businesses or corporations? The ability for huge corporations to abuse their power and take advantage of tax evasion/avoidance and corruption is a separate issue from tax rate but its still somewhat relevant I feel.
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And if it was too expensive those things wouldn't be bought and the market would determine that the prices have to be set lower. Obviously they're not.
Yeah higher earners are more financially secure, some of them could probably take 90% tax hits. That doesn't make it right or fair. Fairness is an flat tax rate for everyone. The markets *are* dominated by large businesses. Which is good. Because they have the ability then to drive market prices which in turn is fairness with people paying what the value of a product is.
The reason tax rate is important here is because with a lower tax rate there would be no need for tax evasion/avoidance.
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And if it was too expensive those things wouldn't be bought and the market would determine that the prices have to be set lower. Obviously they're not.
Most people can't realistically choose not to buy the things I mentioned, hence why I called them necessary commodities. If these things are too expensive people die of starvation, poor sanitation/common diseases, hypothermia etc. This doesn't happen much here partly because we have some degree of government regulation of these things.
Yeah higher earners are more financially secure, some of them could probably take 90% tax hits. That doesn't make it right or fair. Fairness is an flat tax rate for everyone. The markets *are* dominated by large businesses. Which is good. Because they have the ability then to drive market prices which in turn is fairness with people paying what the value of a product is.
And the large businesses can then determine the value of a product, which many would call unfair. Monopolies are not good for consumers. A flat tax rate would completely portugal our economy (as far as I can see, I must admit I have very little understanding of economics) since we wouldn't be able to actually pay our debt and would have to default. If you made that tax rate high enough to pay off the debt then many lower income earners probably would not be able to afford to live, which I would say is pretty unfair.
The reason tax rate is important here is because with a lower tax rate there would be no need for tax evasion/avoidance.
Theres already no need for it, it still happens. It still would even with a lower tax rate.
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Value is set by the market (i.e consumers) you can't force a value on something. Monopolies are not inherently anti-consumer (I can go into detail here but we're already way off news and dipping into discussion). No, a flat tax rate would be fine, if you followed what I've been saying to its conclusion, the businesses that avoid the current unreasonable tax (which is a reason to avoid it) would be more likely to pay it. Moreover the individuals that have top accountants to work accounting magic (Jimmy Carr etc) would find that its not worth it anymore. Therefore we'd actually get as much money in total if not more.
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Value is set by the market (i.e consumers) you can't force a value on something.
As i've already pointed out you cannot choose to not consume certain essential products and so it is very much possible to force a value on these things. For example energy suppliers could choose to increase prices and expect to see very little drop in demand, the reason they don't is because our government would actually be forced to increase regulation of energy prices. A more stark example would be grain speculation (a product of free market) causing artificially high food prices, this isn't a huge problem in the UK but it has caused deaths due to malnutrition world-wide and could cause greater problems here as the developing world grows and demand for dairy and meat increase.
As to a flat tax rate the Adam Smith report back in 2007 admitted that it would cause a £50bn shortfall in revenue and this is a report which was very much pro flat tax.I'm aware this is far from a scientific method but when I looked up the list of states which have implemented flat tax rates I noticed they all happen to have pretty weak economies and often a mixture of high corruption and a very privileged ruling elite. I've yet to see a convincing argument for flat tax that actually holds up to the scrutiny of a real economist, could you provide any sources on sound economic advice for implementing such a system?
As to your belief that large businesses will stop attempting to evade tax is we had a "fair" tax rate I feel you are being incredibly naive. Tax will allways be a significant profit loss to such businesses and so such businesses will always attempt to avoid paying it where they can. A flat tax would likely cause fewer cases of tax evasion but it would go-where near solving the problem and certainly wouldn't make up for the loss in revenue. Although I believe the flat tax rate you are proposing is based on an individual's income tax rather than a business tax rate (?) and if so I guess its not particularly relevant.
Should we start another thread for this shizzle? I'm a bit reluctant to as I don't have a good understanding of economics and I don't really feel I have the mental energy for learning about it at the moment.
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Even if you have an absolute monopoly, new businesses can start up which provide these necessities at the true market value. That business will do better than the one that arbitrarily price fixes and so following the money, more competition will enter the market due to the desire to buy at this lower price. I did spend 2 years learning this. I'd draw a diagram but I don't have a scanner.
Hong Kong is an example of where it works. Though, like a fair amount of what I say, the flat tax rate works better the freer the market is. The Adam Smith Institute did say there would be £50bn shortfall for the first two years with a flat rate of 22% (which I'm guessing is the optimal amount), true, however this doesn't take into account the new businesses that would relocate here from the continent, which I'd be confident would make up the difference and then some. Over many years, it'd return in spades. Adam Smith proposal also included people on low income not paying tax.
Actually it becomes harder to avoid tax with a flat tax rate as well as being fairer for large businesses. How do you fit your business into lower tax brackets if there aren't any? Flat tax of business without flat tax of individual income would make for some interesting scenarios where you could lower your tax by putting x amount into a business to be paid to you until you hit a soft cap for personal income and the rest then paid directly to yourself. The reason I mentioned individual tax is because it goes into making a flat tax more cost effective.
My first A-levels were centered around Economics and although my preference is by far micro, I guess enough macro sunk in that I've retained at least a partial interest in it.
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Even if you have an absolute monopoly, new businesses can start up which provide these necessities at the true market value.
Not necessarily, if that monopoly controls enough of the supply or if the business requires high funds or great degrees of infrastructure to set up then many will be unable or unwilling to start. Generally I'll concede your point here but I'm far more comfortable with a government system for regulating (to a reasonable degree) the price of necessary commodities.
The Adam Smith Institute did say there would be £50bn shortfall for the first two years with a flat rate of 22% (which I'm guessing is the optimal amount), true, however this doesn't take into account the new businesses that would relocate here from the continent, which I'd be confident would make up the difference and then some. Over many years, it'd return in spades. Adam Smith proposal also included people on low income not paying tax.
You seem to be mixing flat income tax proposals with tax on businesses, corporation tax in the UK is only 1% greater for large businesses than small ones and this is going to be lowered so that they are equal anyway, the Adam Smith Institute (and every other source I've looked at) has been regarding flat income tax rates. And I really very much doubt that a group of highly educated economists who are pushing for a flat tax system would fail to take into account the potential gains of a flat tax system when preparing a proposal for that very system. £50bn was quite likely to be their lowest reasonable calculation.
Lower corporation tax can tempt larger international businesses to move over here but it also means we lose revenue from corp tax, it currently makes up a reasonable amount of our national tax income which is not the case for many other european countries since they've cut corp tax to attract these businesses. I feel that a new take on taxing businesses would be better for us than simply lowering corp tax as this has just led to a competition between nations to lower their corp taxes or provide special deals to international businesses.
Hong Kong is not an example for flat tax rate as their tax rate is not actually flat, it is a flat cap but progresses up to this cap. The low and middle earners in HK still pay much less income tax than high earners. HK could be used as an example of low taxes and low public spending but thats a different argument.
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I guess one of the main things, Colossus, is that you're totally failing to take into account entry barriers into markets, which in many fields of business totally screw over this idea you have that other companies can *always* swoop in and undercut the current oligopoly or monopoly on prices. You're living in the world of neoclassical economics, which when you consider some of the built in assumptions of those theories is blatantly not the world most of us actually live in.
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Exactly which barriers to entry would even apply Jub? Given we have laws preventing barriers to entry from being a thing pretty much at all and new businesses starting up get government help and are incentivised in other ways for doing so. You can't always undercut monopoly prices, but then this was never disputed, especially when monopolies sell at under the market value which they can do because they are monopolies. At which point the argument is moot because this was about monopolies fixing prices too high. Neoclassical economics sounds like its way outdated sure, but in fact its still used alongside Keynesian economics to produce what we use all the time or offshoots. The assumptions used are nothing particularly radical: businesses want to make money, consumers want to pay the lowest price.
@Penty. Because they are highly educated economists, the £50bn shortfall was for the treasury rather than just tax, the mention of the low income peoples was a reminder that in this proposal, the difference isn't being made up by other forms of tax. Ok if you feel more comfortable trusting a government than a business, that's up to you. More power to you to make that decision. I doubt you're wondering but anyway: I trust governments to be good with... actually very little and businesses to at least be relied on to try to make money.
As a good friend once told me 'You can always trust a dishonest man to be dishonest, honestly, its the honest ones you want to watch out for. You never know when they'll do something incredibly....stupid'
De-incentiving businesses I feel is more of an issue than you seem to give credit for but I do understand and your logic is sound, I just disagree with priorities here. HK uses a flat tax rate its just that flat tax, despite the name, doesn't have to mean everyone is taxed at exactly the same rate. There are things like NIT (negative income tax) which is a flat tax even though it doesn't include either word in its name.
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Take energy or water, for example; the amount of kit/ownerships needed to actually start in the industry is so vast that basically any pretence that a free market is operating is a bit of a sham. In terms of assumptions, a good example would be that neoclassical and classical economics both assume perfect knowledge, which is clearly bullarmadillo and makes a lot of difference at the consumer end. It's often simply not the case that the market allows the most superior, cost-effective product to win out. As you rightly say, we can trust businesses only to try and make money. Why, then, would we trust them not to be doing whatever they can to avoid having to produce the best goods for the best price? Their whole raison d'etre would imply they should be trying to produce the cheapest goods and selling them at the highest price that they can get away with, and the market can't always fix that when you take into account that people have a lot of reasons for buying products other than their actual cost-effectiveness.
I guess my view is that the market is a tool; there are some problems you can solve with it, and there are some things it's damn good at. For many standard consumer goods, competition can be fairly good at encouraging innovation and pushing prices down. The downside is that there are a lot of places where market solutions just don't make sense. These especially occur where goods are very basic, hard to have competition over, represent a "public good" where we can save money by just bulk providing them for everyone, or some mix of the above. I'm not actually a massive statist generally: I don't like the idea of too much power being concentrated in the government's hands. But I do think we need to be even more wary of businesses, not least given it's significantly harder to get rid of them.
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HK doesn't use flat tax, its often described as a flat tax but its nothing like the flat tax rate you are advocating.
Edit:
I'll admit I haven't checked out any of the sources listed on this (who was time for that armadillo?) and its from 2007 but regarding HKs tax system this is my best source http://archive.freedomandprosperity.org/Papers/hongkong/hongkong.shtml
Also as to trusting businesses to make money, yeah well why would I give a damn if a business makes money if I gain no benefit from it? If my government manages to take revenue from that business and place it into my society then I probably want that business to succeed but if I can't trust my government to do that then I probably have no reason to care.
2nd edit: The above paragraph is actually really stupid, please ignore. I shall try again.
I can trust a business to make profit but if they make a profit at my expense (and since we were talking about increasing the price of basic commodities then lets say they do this by grain speculation) then I would like to trust my government to prevent that business exploiting me (by preventing grain speculation from occurring and by preventing the need for it in the first place by preventing exploitation of farmers.) If I can't trust my government to do this I would have incentive to effect a change within my current governing system, which thankfully I have some (very much limited when talking about me as an individual) power to do so in a democratic system.
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No offence bud but it looks like you don't really know what market value means, it has nothing to do with cost-effectiveness. Also, nowhere did I say businesses only want to make money. Sometimes profit isn't even the goal and shareholder satisfaction is or other things like that. Perfect knowledge, completely irrelevant here, is more and more a realistic assumption (as in people generally know what price milk is or how much car insurance should be). We have a load of energy providers, no idea about water but I don't see why we shouldn't. They're not examples of difficult markets to break into.
This is a weird thing I've noticed, I'm quite happy to give government a load of power until it comes to economics, whereas you're the opposite. Got to be some kind of explanation for that.
@Penty, for the exact reason that I don't know which type of flat tax would be suitable I didn't say what the type of flat tax would be, just that they're a good idea.
Why give a damn if businesses make money? They contribute to increasing GDP which boosts the value of our currency, which means that everything we have costs proportionally less.
EDIT: Commodities controlled by the market aren't more expensive than ones controlled by governments. Businesses that exploit their customers don't survive. Preventing the exploitation of suppliers is an issue but taking your earlier logic, why care if it doesn't affect you? It's also irrelevant here.
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Why give a damn if businesses make money? They contribute to increasing GDP which boosts the value of our currency, which means that everything we have costs proportionally less.
Yeah I know thats why I admitted I was being stupid :P . I'm aware its exceedingly naive to trust a government without scrutiny but it's also exceedingly naive to trust businesses not to exploit consumers and no offence but I think its pretty stupid to say they are incapable of this when it is quite obviously done on a regular basis in countries without effective government and even in countries with relatively effective government (again any of the examples I have given.)
HK's optional flat tax is exceedingly different to the flat tax proposed by right wing groups in the UK (for example UKIP) so I don't see how it can be used as an argument for flat tax in general. I've yet to see any actual evidence that the flat tax system advocated by folk in the UK would benefit anyone but higher earners.
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Sorry for the double post, thought it might be less confusing than editing again.
No offence bud but it looks like you don't really know what market value means, it has nothing to do with cost-effectiveness.
It can have quite a lot to do with cost-effectiveness, you can't make a profit by selling a product for less than your production costs so decreasing production costs (ie increasing cost-effectiveness of production) can decrease market value.
And yes businesses can exploit consumers, lets go back to energy providers in the UK. As you mentioned we have quite a few of them (well we have a few anyway) at the moment but if you look back a few years thats really not the case. The "big 6" energy suppliers who still massively dominate the market used to be an oligopoly and without regulation almost certainly still would be. You see energy supply does take a large investment to start up and this alone is enough to deter a fair amount of business. But once a new supplier starts up they introduce competition to the big 6 (since the big 6 can quite easily collude to keep profits high whilst they form an oligopoly they won't have had much before) which the big 6 would not be overly happy about. Since the big 6 have already been making massive profits they could afford to employ short term predatory pricing for long enough to bankrupt their new competitor. Now this would be good for consumers in the short term but once the new competitor is driven out of business the big 6 can then hike up prices again and we go back to the oligopoly exploiting consumers. Following the fate of the previous competitor new businesses will be severely deterred from trying to break into this market (and anyone in a position to lend finance to start up a new business in this market will be similarly deterred.) As to why this hasn't happened in the UK its because we do have government regulation of businesses. The fact that independent energy suppliers are an option for us is not an argument against regulation of business but rather an argument for it (actually there is still an investigation ongoing into whether the big 6 have been colluding to drive up energy prices but I think this is more a matter of taking advantage of consumer's laziness and/or ignorance for the most part that allows them to dominate the market still.)
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No it really doesn't. The market value is an equilibrium at which the theoretical value of a product lies with respect to supply/demand/elasticity.
The fact that recently more suppliers have started up surely demonstrates my point? Profit is also irrelevant here. You also realise that once prices go down due to predatory pricing its more difficult to get them back up? That then the relationship between supply and demand changes so that people are no longer prepared to pay the high prices that were there before. Also the relationship between the producer and the supplier changes which then causes further long term effects on the supply/demand curve. The reason why this hasn't happened in the UK is that if the prices shot up, the companies would get an instant asston of competition from E-European suppliers.
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No it really doesn't. The market value is an equilibrium at which the theoretical value of a product lies with respect to supply/demand/elasticity.
Well supply of a product is affected by the cost of production, so yes even by the very vague definition you've already posted the cost effectiveness of production will affect the value of the product.
Would you mind stating what definition of market value you are using? Because (according to wikipedia) International Valuation Standards defines market value as "the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion." Meaning that the seller has input into the market value, and any seller is going to have to take into account the cost of production when attempting to determine the value of their product.
The fact that recently more suppliers have started up surely demonstrates my point? Profit is also irrelevant here. You also realise that once prices go down due to predatory pricing its more difficult to get them back up? That then the relationship between supply and demand changes so that people are no longer prepared to pay the high prices that were there before. Also the relationship between the producer and the supplier changes which then causes further long term effects on the supply/demand curve. The reason why this hasn't happened in the UK is that if the prices shot up, the companies would get an instant asston of competition from E-European suppliers.
Why is profit irrelevant?
Once again energy supply is always going to have a high demand as its a necessary commodity, sure you can try to minimise energy consumption (which most people and business do already to some extent) but energy suppliers can rely on having a high demand, so in the example I gave they could easily raise prices after lowering them. Consumers may complain but short of interfering with the free market there is little they can do.
What does the E stand for in E-European? Regardless, any energy supplier not already active within the UK would still have to break into the UK market and would face the same costs as any supplier starting up in the UK and would be facing the same risks and deterrent.
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I just stated the definition I'm using, which is the same as the one you stated but using more economics words and less bs. But what its saying I think you've misinterpreted. What that means is: the estimated amount (the theoretical equilibrium) at which anything is sold at where each party has market knowledge and within a time frame which precludes long-term economics from being a thing.
Profit is irrelevant because you're talking about state owned/controlled markets. If profit was relevant there then it would be no different than a free market and this discussion would be pointless. The whole point of government controlled/influenced markets is that companies owned by governments do not have profit driven agenda but instead have shareholder (government and by extension the public) satisfaction in mind (that does not mean public services priority are comfort btw).
No, energy demand is *inelastic*, high or low is relatively unimportant. E is for Eastern. They have a growing skilled workforce working jobs which do not utilise their skills (basically the countries are waiting for infrastructure) who would jump at the chance to land a stake in a UK market. There *aren't* risks (any more than any other western European country) or deterrents from starting businesses in the UK, there are in fact incentives. http://www.ukbusinessgrants.org/
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Could we split this off from the main news thread, anyone? It' getting a tad cluttering.
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Done. Couldn't think of better title.
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@ CG I'm not sure anyone here would disagree that Miliband is a tool, unless perhaps they were wanting to use harsher words.
@Rob As to market value I still fail to see how the seller is not going to take into account the cost of their supply or production when selling, meaning cost effectiveness would affect market value no? Regardless, I don't see why you mentioned market value in the first place, you may notice Jubal did not bring it up at all. Or to put it clearly, you utterly failed to refute his actual argument. If you want to attempt to refute it you need to address the points he actually made.
I do believe his point (apologies if I'm wrong about this Joobs) is that free market should mean that for basic goods the lower price range for consumers reflects the cost-effectiveness of businesses (ie the cheapest suppliers of a particular good/service sell per unit to consumers at a price reasonably close to their cost per unit) however where monopolies are allowed to form within certain areas with high barriers to entry (the examples he gave were energy and water supplies which have the barriers of high starting costs due to requirement of extensive and expensive infrastructure) this is not what happens. And you seem to have attempted to refute this by using the UK energy supply industry of an example, which is invalid since as I (and you as well actually) have pointed out the UK energy supply industry is heavily regulated and is such not an example of free market.
There *aren't* risks (any more than any other western European country) or deterrents from starting businesses in the UK, there are in fact incentives. http://www.ukbusinessgrants.org/
What are you actually arguing the point for here? Because it seems like you are using an example of government regulation (in this case positive regulation, but still regulation) to advocate free market. To be clear I'm not arguing against the general introduction of competition within the marketplace, I'm arguing against allowing a completely free market.
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Sorry if I sound really condescending here, I'm just trying to keep track of what we're actually arguing for.
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I don't even know who he/she/it is I just took something from the OP. :P
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The fact that you didn't (don't?) know the terms used means that this has devolved from what was an argument on tax rate to what a free market is. For the past 3 posts or so I've just been telling you what terms mean and not arguing anything because I thought that you'd then look over whats been said and realise that actually some of the previous posts don't make a lot of sense or are flat out wrong.
I don't even see any points being made by either of you that a) I've accepted as a difference of opinion which has no determinable right/wrong answer b) refuted c) gave definition which makes point invalid.
Cost effectiveness is pointless to bring up (again), its a naturally occurring thing when you talk about markets. It's a given, there is no point in mentioning it. Elasticity is the point to argue, you could argue that because the energy market is inelastic, it needs more government control than a regular market, I'd have to agree. Then we'd argue about where to draw the line on which inelastic products need govt intervention and which don't or what degree of govt intervention is necessary before the risk of govt failure outweighs the risk of market failure. Things like that. By the way I just realised how much I fekkin love economics xD
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I don't even know who he/she/it is I just took something from the OP. :P
Some explanation would probably be good for those who don't follow the UK political scene.
Ed Miliband is the current leader of the United Kingdom's Labour Party. My impression is that he's widely regarded as not very effective, hence an occasional nickname of "the Milipede". Depending on the outcome of the general election in May, he might well not be Labour leader for much longer.
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On the other hand, he might be the Prime Minister. :P
Colossus: I guess what I feel like our side of the argument is trying to point out is that a neat little free market like you get on the supply/demand graphs a) doesn't operate in the real world very well anyway and b) to the extent that it does demand can be manipulated significantly to the detriment of consumers which prevents the market function actually proving better outcomes for consumers.
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On the other hand, he might be the Prime Minister. :P
Indeed. I'm not sure which is more scary: Miliband being Prime Minister, or Miliband not being Prime Minister.
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Personally, I'd back Miliband over the alternatives - though I think he would be given a horrendously rough ride as PM by the media. In fairness to the man, his problem isn't stupidity or abject nastiness: he's clearly out of touch and hasn't got a great deal of charisma, though.
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The fact that you didn't (don't?) know the terms used means that this has devolved from what was an argument on tax rate to what a free market is. For the past 3 posts or so I've just been telling you what terms mean and not arguing anything because I thought that you'd then look over whats been said and realise that actually some of the previous posts don't make a lot of sense or are flat out wrong.
I'm pretty sure we haven't been arguing about what a free market is, is it not simply a market system in which the government has little/no interference on factors affecting supply and demand?
you could argue that because the energy market is inelastic, it needs more government control than a regular market, I'd have to agree.
I thought that this was what we were arguing about since it seems to run contrary to your claim that businesses are incapable of exploiting consumers. But I guess that you were generalising and that this has all been rather pointless?
Cost effectiveness is pointless to bring up (again), its a naturally occurring thing when you talk about markets. It's a given, there is no point in mentioning it.
Well surely its worth bringing up in a debate about whether or not consumers are being exploited since you could reasonably assume that exploitation would be obvious (for a basic good anyway) if the cost to the consumer is not actually reflective of the cost of the good. And Jub's original point was (I think) that if a business is not transparent about its profit margins its actually quite difficult for a consumer to determine whether or not they are paying more than they should (this would of course assume that competition is low or nonexistent such as when a natural monopoly exists.)
Also, since I feel may as well try and understand this, surely minimum market value would reflect maximum cost efficiency (assuming high competition levels) for the reasons I've already pointed out earlier?
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The thing is that you have absolutely no basis for any of that whatsoever... You realise that without this theory economists would be out of a job? Market manipulation is illegal as well btw. Without the theory side of things there isn't anything to work from, you're just making stuff up at that point you need to be able to have a direction that you think the market will go and provide a model for that to work within. Simply saying: Free Market doesn't work in reality is fine I guess, but what do you have to work with then? You just start saying, 'well if x happens then y *must* happen because that's what obviously would happen!' but without anything to say why. You seem to have some kind of baffling agenda against a free market without knowing how it works and are making stuff up to fit your theory that money is evil.
To be honest all of them are simpering, whining tools. Like or hate him, Farrage probably has the strongest personality of the current leaders but that's not saying much at all. Boris might take that in a bit though. Much rather have a leader who stands by their convictions and doesn't pander to the media or voters and just says what they think is best for the country. Too much to hope for and would fail horribly anyway.
@Penty: Nope. You can have a free market with mild-moderate government intervention like we have here or even with heavy government intervention like China.
No I did not say anywhere they are incapable, I said they don't last long if they do.
No. Think about it: a business is being clear about all its expenses, every little thing. Does the average consumer have the time or ability to go through a companies records to see if they're being ripped off or not? portugal no. Market value doesn't have a min or max in theory and in reality it shifts from product to product, company to company.
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What definition of free market do you use? Because the loosest definition I can find from a quick google is "an economic market or system in which prices are based on competition among private businesses and not controlled by a government" whereas the majority of them are closer to wikipedia's "A free market is a market system in which the prices for goods and services are set freely by consent between sellers and consumers, in which the laws and forces of supply and demand are free from any intervention by a government, price-setting monopoly, or other authority."
Is China actually a free market economy? From what I know their largest domestic businesses are government owned and operated and the others are likely to be bribing gov officials, IIRC there was some news stuff last year about microsoft's chinese offices being raided because they were competing with business owned by the government (I think they were officially accused of breaking anti-monopoly laws or something.) From what I've heard their new(ish) leader seems committed to tackling corruption and promoting competitive business nowadays though.
If you don't think consumer exploitation is a problem then why the energy market needs more regulation than others?
Clearly the average consumer doesn't have time to spend calculating their energy supplier's profit margin but all it takes is one relatively educated person with time on their hands (and there's quite a few of those about tbh) to work it out and spread the news via various forms of mainstream media for the average consumer to find out.
By minimum market value I mean the minimum value you could reasonably expect it to be.
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Both those definitions use a sort of hypothetical 'ideal' (in the sense that it's what it trends towards if left in a simulator, not that it's a desirable thing)
A free market is a market where the price of a good or service is determined by supply and demand.
This doesn't say 'solely determined' for a reason. Yep, China does have a free market economy, supply and demand are a thing there even though as you say the government owns huge amounts.
The energy market needs more regulation because the market price of energy is above what a group of low earners can afford. So the government artificially lowers it to a price which means that they don't have to pay people they care for (financially) more. Basically they redistribute the cost from one area of themselves to another and one would assume that it costs them (us? the country, whatever) less.
The minimum market value doesn't exist as far as I'm aware. And it seems like it would change person to person. And would have to be held without bias.
EDIT: By artificially lowers it I mean that it doesn't affect supply or demand and goes straight for the price. You can alter the value of a product un-artificially by creating more/less demand (advertising, health warnings etc) or supply (buying a ton of wool to be spun into jumpers will mean more jumpers are on the market and so the price goes down).
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So any economy is considered a free market as long as its government is not directly setting prices? I always thought it would operate on a sliding scale with the ideal being one end and china probably being slid right off the other end of the scale.
As to minimum market value what I was trying to say is that generally is it not safe to say a product would not be sold for less than its cost, hence the minimum value you could expect for any given product would reflect its cost of production? And so if the product is a basic good and there was high competition the market values for comparative products would reflect the cost efficiency of the businesses supplying/producing them.
I think I'm generally happy to agree with you, I suspect we may have different views on what constitutes consumer exploitation but I don't think its particularly important tbh. Thanks for explaining this stuff btw, was actually quite interesting.
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It is a sliding scale you're right there and like many sliding scales either extreme is ridiculous irl. But yeah that's the very basic criteria for a free market. With regards to the minimum market value thing...I'm going to go off on a tangent but it's relevant...Sorta.
To set up a business you need land, labour, capital, entrepreneurship. Each of these will have a different cost to start with and a sort of upkeep cost. Land is the physical location of your business, an easy one to work out: either buy land or rent it (even bought land has upkeep because you take maintenance into account). Labour again is easy enough (initial cost of labour is things like paying construction workers to build an office, upkeep is paying your staff). Capital is anything which can be assigned a monetary value, so it could be literally money or it could be that you need some kind of machinery to get your business to work or a pc or whatever, generally things. The initial of this is easy to work out (exactly what you've spent to get the business running) but the upkeep usually happens on a sort of 'as it needs fixing' basis so you put in an estimate. The entrepreneurship you provide yourself; it sort of represents the opportunity cost of your person being used for this project and not something else but also is a measure of profit. That part honestly always eluded me and I didn't see why not just call it profit...
Anyway: For entering into a large market with either monopoly or oligopoly (by the by, a monopoly is defined as a business with 25% market share) you'll need to be competitive in price which is difficult because they'll have benefits from economy of scale and brand loyalty and such things, especially if the business has been around for a long time. So, you have all your initial expenses and you have the yearly/monthly/daily/hourly 'upkeep' costs. The upkeep should change according to the market (e.g one year rent may go up due to housing prices) but the initial costs will stay the same (with regards to paying them). The businesses already in the market will have paid their initial costs already and so will just be paying the upkeep which is where they get their predicted yearly expenses from and then decide whether its still profitable to run the business. For the one starting up they ordinarily would have to factor in paying this initial start up cost but because they can't afford to do that due to needing to have a competitive price (just talking about necessities btw, otherwise things are different) they are forced to operate at a loss for a while until they have paid off the initial cost. Although by that time they can be in debt a lot of money which then locks them in the market or else they go bankrupt.
So the moral of the tangent is: you either get things that are affordable or you can have more choice. Although having said that, perfect competition also drives prices down while giving maximum choice. But it's a unicorn.
Happy to explain economics, finally there is a topic which I have at least some credentials in xD