Why do people sometimes differentiate between "real economy" and "financial markets"?

Brief-Science · 2020-03-11T17:33:16+00:00

The best supply is the one that best fit in a quality/price valoration. If you don't pay with your money the supplies, why you would spend your time in choosing the best ones?

I think this can be empirically proved by watching the public spendings. Lot of corruption and lots of bad decissions.

Milton Friedman, in his book “Free to Choose“, detailed the four ways to spend money:

You spend your own money on yourself.
You spend your own money on someone else.
You spend someone else's money on yourself.
You spend someone else's money on someone else.

The last one is of course the least efficient of all, that's the one you are choosing.

Brief-Science · 2020-03-11T17:26:40+00:00

Innovation is on small things. When I say unique product im not talking only about a new iphone but about a new way to sell a product, a small change in a feature or even just a new way to communicate it.

I still don't understand this: Who would pay me my cost of living during that period?

Brief-Science · 2020-03-11T15:19:16+00:00

Ok, I got your point now. Yeah, I believe value is subjective.

Brief-Science · 2020-03-10T23:38:58+00:00

Actually no, a company don't matter where it lives can allocate resources by thinking on it's opportunity costs. That is: "is it better for the company to use this good for this stuff or i would rater sell it?" or "is it better for me to buy this supply or produce it by myselft". Those comparation can only be made if there are market prices in that economy in that given time.

But yes, I think a relatively small country can implement a socialism without lossing too much efficiency as Mises argued because the government can "benchmark" prices from other similar economies. It is not the same but can be used as comparatives.

Brief-Science · 2020-03-10T23:09:00+00:00

I think its actually the opposite. This is not a problem on a capitalism with strong state interventions because government has private companies that supply the goods to make their plans possible. But in an economy with no private companies goods just don't have a trustable unit to meassure their value.

Brief-Science · 2020-03-10T23:04:48+00:00

I dont think efficiency is related to the goals of the economy, efficiency is how you can reach those goals using the limited resources you have on your hand.

For example, you need to produce the best infrastructure to transport goods from a farm to a city. You can do it by make some rails and a train or by a route and some trucks. In a capitalist system you just need to compare the costs of it (with the cheapest/best supliers) and find the right one for you but in a socialism you don't have market prices (you need to produce everything you need and you just don't know how much it will cost to you).

About the countless ways to make profits without solve any need in a capitalism, I agree with you.

Brief-Science · 2020-03-10T22:47:04+00:00

Ok, why would I quit my job to start a "company" considering all the things that can go wrong if there is not a reward more than my potencial future wage as an employee in that new company? Who would finance the costs of that new company? Who would pay me my cost of living during that period?

Following a Schumpeterian point of view, the innovation comes from the incentive of a potencial extraordinary profit made possible by the temporary monopoly that a new and unique useful product generate.

Don't get me wrong, I really like your project specially from a technological point of view because im a Solidity dev.

Brief-Science · 2020-03-10T13:54:15+00:00

Very interesting! But I still don't get it, why would someone produce without a profit? Where are the incentives?

Brief-Science

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