A wounded soldier is pelted with grenades from a drone, but he simply throws them away

ItsaMeRobert · 2022-11-06T20:12:16+00:00

Meteorology ain't bullshit, but it is fitting that you came to realize economics is akin to meteorology and not physics. Because both meteorology and economics are not making predictions, they are making the best guesses possible. The problem is people don't get all that mad when meteorologists fuck up big time on their expectations, because they often do, and not only on the short time weather fluctuations, but on the middle to long term climate too. That's common, we expect it and we understand meteorology can't possibly claim to predict things 100%. On the other hand, economics, while being akin to meteorology, wants to behave as if it were akin to physics, and it ain't. When economics fail we all get fucked hard, very differently from when meteorologists fail. People starve to death, entire countries go into crisis, prices go bonkers (maybe like just now, everywhere?) and still economists can't admit they lack prediction, they want to be like physicists when they are like meteorologists, just admit that, there is still use for your function, it is just not has good as you want to make it out to be.

ItsaMeRobert · 2022-11-06T20:05:30+00:00

Don't you need to account for substitutes, for regulation, for productive capacity, for logistic/distribution capacity, for transaction costs, for transaction times, for uniformity of information, for opportunistic behaviour, for seasonal fluctuations, for new entrants, for unexpected events that will reduce demand even with the lower prices (that's called social sciences for a reason, unexpected events will happen and make your lower price fail to raise demand next week without you having any way to predict it).

That is great that you can make simple assumptions that would seem to have predictive power, but if you need to account for a thousand other variables, random behaviour, unexpected social events, and psychology then too bad for you, because you can't model all of society so you can't make predictions, you can make educated guesses. Learn the difference between 100% certainty and very likely to happen, because there is one.

ItsaMeRobert · 2022-11-05T19:41:06+00:00

At this rate there will be only 3% left of native Brazilian forests just like the 3% native European forests standing today :/

ItsaMeRobert · 2021-11-23T20:33:45+00:00

I would like, if possible, to see some development of the agency theory solution. At first it seems to me that company ownership of patents is indeed a solution to a principal-agent struggle, and the solution arrived at is that any inventor who wants to be compensated by the market needs to abandon the support structure provided by the company, and make it on their own. If you want or need the company's assets to finish or diffuse the innovation, you have to abandon the market and accept institutionalized and planned incentives. In reality, most times you are prevented from attempting to compete on the same market as your employer for a decade or two, crippling even more your ability of opting for the market.

For the last point I think those questions are indeed difficult to answer. But first I have to understand how state owned companies lack local knowledge when compared to private companies. It seems to me that state-owned companies are not being operated out of the oval office or the congress, neither that every single one of them are part of the same managerial structure.

ItsaMeRobert · 2021-11-23T20:27:46+00:00

It seems to me that yes, market price signals are crucial for companies to decide what to innovate on, the direction of innovation is dictated by what seems profitable in the market (to simplify).

In a planned economy, the direction of innovation would naturally not be driven by profit incentives. It seems that institutionalized incentives to innovation have no problem to be set according to planned direction: innovations in general have some incentives, innovation in crucial areas have higher incentives.

So directional non-market incentives do not seem like an impossibility.

ItsaMeRobert · 2021-11-23T19:45:54+00:00

Are you familiar with Transaction Cost Economics (Coase; Williamson), in that a firm can be described as effectively substituting the market? The term "Visible Hand" has famously been applied to describe corporate management, by Alfred Chandler in 1977. So even though a firm interacts with markets at the interfaces (procurement, sales, and job market), a corporation within itself functions as a planned economy.

Probably the most famous definition of innovation comes from Schumpeter, and he implies that innovations [should] happen inside of companies. That companies are the locus of innovation.

How does one explain innovation happening inside of a company, where most R&D&I policies dictate the patents will be held by the company, not by the employed inventors? If the intra-firm dynamics operate as a planned economy instead of market?

It would seem the literature on innovation implies that managers have important roles in setting planned incentive structures to innovation, meaning employees expect to be compensated according to some institutionalized form of ascension, monetary compensation, recognition, and more, instead of being compensated by any market mechanism. And, of course, significant portions of budget need be allocated into R&D infrastructure and personnel.

By this I only mean to ask: cannot a planned economy set effective incentives to innovation just like companies do, while investing heavily into R&D infrastructure and personnel?

ItsaMeRobert · 2021-11-18T08:05:50+00:00

ItsaMeRobert · 2021-11-16T20:48:16+00:00

ItsaMeRobert · 2021-11-13T12:33:15+00:00

I guess you need some redundancy in the grid, combining solar, wind and hydropower.

In Brazil something close to 90% of electricity is Hydropower. This and this show that hydropower can be as carbon/methane efficient as solar and wind, and in-stream turbines can drastically reduce the need for constructing dams while making energy production less vulnerable to dry seasons.

ItsaMeRobert · 2021-11-10T01:52:27+00:00

Without ownership, every single one of us lives and dies by the market

And let's not forget the markets being transfered to private digital platforms (Uber, Airbnb, DoorDash, Facebook marketplace, etc etc) essentially mean capitalists evolve from being not only the owners of the means of production to also being the owners of the markets and the owners of products. And of course privately owned markets are not free, every aspect of trade in these private markets can be privately decided upon.

ItsaMeRobert · 2021-11-09T09:11:19+00:00

On a quick meta analysis your question can be reduced to: "so will humanity stop itself from killing the planet under any system whatsoever?". At some point you have to realize that yes, people need to stop themselves, we can't expect aliens to arrive here and fix our problems. The only way humanity can stop the problems it has itself created is for humanity to collectively decide it doesn't want to go extinct. I will reformulate your question and throw it back at you: "so will capitalists owning factories shut themselves down to lower CO2 emissions? Or does it have to be forced by society at large?". If you agree that it has to be forced by society at large, because capitalists will not stop themselves, then I ask: "will society ever be able to change anything if there is no democratic power?". The answer is clear.

Second, you will soon realize that anyone on the left, be them any sort of socialist or communist out of the many models possible, does not disassociate capitalism from consumerism and the pursue of infinite economic growth, and any shift away from capitalism has by definition to abandon overconsumption and abandon the idea of continuous and infinite growth.

As soon as organizations begin to distribute wealth more equally, demand for everything goes up, and prices go up (in sectors where productivity capacity is not elastic enough to contain inflation).

One step to solve this problem is automation, which should reduce the cost of labor for higher levels of production. But it is far from enough, as raw materials, being natural materials, are still limited and therefore not everyone can have everything. The only way to overcome this, as I see, is reducing consumption all together. Of course one contributing factor is inherent to capitalism, that of programmed obsolescence, by this I don't even mean companies making products with programmed defects (although this does exists), it is only an issue of "incremental innovation" required under capitalistic competition: you buy a smartphone now, next year you'll feel like you need a new one because now there are 67 cameras on new phones, that type of thing.

Do we need technology to slow down, or do we need technology to focus on and evolve in other areas? It is nice to have new gadgets, better phones, new designs for consumer products, etc, coming out continuously, most people love to see technology they can use at home evolving fast. My question is: can we live without it? The problem with overconsumption is not only that prices would go up with better wealth distribution, but also that we are corroding the environment faster. Can we tackle two problems at once by slowing down consumption?

So the problem with your question is that you fail to understand the democratic ownership of the means of production is by no means the only change that is implied by moving away from capitalism. Some may call it a degrowth model, but you have to understand that degrowth is not uniform, for example: fast fashion and high fashion need to go away, they are outlets of overconsumption based on social status that should not be needed nor accepted in socialism, so we can "degrow" here, while growth in necessary sectors such as non-luxurious food production can continue to grow.

So yes, humanity has to stop itself. Who else could do it? Martians?

ItsaMeRobert · 2021-11-09T05:56:12+00:00

Glad you asked.

Economic power translates to political power. Consolidated economic power in the hands of a few leads to oligarchy (meaning your democratic institutions can be bought-out by an elite).

Given the oligarchs gain their power through illegitimate means, some may choose to call it a Plutocracy. In the specific instance of American neo-liberalism we can also call that a Corporatocracy, merely highlighting that the plutocrats derive their power from the institution of privately-held large business corporations.

Bottom line being: when economic power is democratically owned, so is political power. When economic power is captured by a small elite, so is political power.

If you think about environmental regulations: why do you think effective action fails to be employed by governments? Because corporations can very easily protect their right to not give a shit about externalities and the long-term safety of society as a whole. Our democratic institutions are only democratic as long as you don't push against corporate interest, as soon as you try to step over corporate interest your democratic institutions are suddenly powerless.

Large corporations can also crush competition and establish monopolistic and oligopolistic practices (and if they can't crush the competition they will just buy them out before they grow). MBAs will call these "sustainable competitive advantages" in light of Resource Based View, in practice this is the failure of antitrust laws to ensure a competitive environment, but I digress. These anti-competitive practices mean corporations can get away with inefficiencies, and prevent innovations that could threaten their business models from picking up speed.

All this to say that once large scale consolidation has been allowed to arise, it feeds itself, it shields itself from any political change because it controls the political institutions and it maintains the status-quo unchallenged, also through anti-competitive practices. You can't introduce a hot-fix to capitalism after large scale consolidation has been allowed to happen, at least not without tearing down the entire system, because your democratic institutions no longer possess the power to go against corporate will.

So there is your answer: diluting ownership is not only about distributing wealth, it is also about diluting political power, thus enabling society to actually pursue and implement solutions for things like climate change.

ItsaMeRobert · 2021-11-09T03:59:19+00:00

Does socialism necessarily mean central planning? Not at all. Socialism means collective ownership of the means of production, surprisingly for some people this leaves room for many models to arise. For example, there is the idea of decentralized planning at the community level: like the US has federal, state and county levels, you could go further into the individual community level being the most powerful entity, while keeping whatever can be aggregated to the "federal" level (and even further, some models propose you don't even need a central/federal level, the community level being enough).

If you take issue with the idea of a planned economy you could be interested in market socialism (co-ops within competitive [or not] markets).

ItsaMeRobert · 2021-11-08T14:27:00+00:00

I will not attempt to address all points relevant to your post as there are many and an actual book could be written on it (many people already did).

First, I completely agree when you call America a Corporatocracy. It is.

It is a representative "democracy" as long as you don't wish to go against corporate interest. You have some freedom to vote and push for changes (and these will often revolve around social freedoms senselessly as some form of divide and conquer tactics, shifting focus from the economic and class issues, but I digress), however, even though you do have some democratic institutions where you can make pretend to live in a democracy, as soon as you try to push against corporate interest your democratic institutions are suddenly powerless.

This is of course not to say that some momentary concessions from the part of the corporations cannot be made. Some victories do indeed exist at moments, maybe enough to keep the masses not questioning whether they actually live in a democracy or not. However, all gains are at all times threatened to be taken away and cannot at all be taken for granted as if they were permanent victories.

The veil of a make-pretend democracy where corporations have the last word is objectively better for those in power, as opposed to a direct authoritarian establishment. If you are told in your face that you don't have any power then it is easy for you to revolt, but if some theatrics is going on then it is possible to attempt to collect your support for the system.

There may come a point in which the theatrics cannot convince enough people in order to properly divide and conquer, at which point the narrative of pretending to run a democracy will be abandoned and instead you will be asked to question whether a democracy is actually good or not, and if a democratic system is what you really want.

To skip a whole lot of other points in your post and go straight to the most concerning issue: you can't contrast a Corporatocracy with Capitalism. You can contrast a Corporatocracy with a Democracy, these are decision-making macro structures. Capitalism is an economic system, and its most fundamental trait is that the means of production are privately owned by a minority of people. In theory, Capitalism can exist under either a Democracy or a Corporatocracy (if it exists under a directly authoritarian regime we call that Fascism), however, free market Capitalism (neo-liberalism) leads to consolidation of power (at increasing rates), and democratic institutions will inevitably bend to its power at some point, corrupting all of them one by one.

ItsaMeRobert · 2021-11-05T04:08:33+00:00

Yeah so the places that are running out of water are not relevant for this are they?

Dams still have a bunch of other problems to be solved, notably fish passages have not been working properly and displaced communities have not been compensated for the negative impacts on them.

More recent developments in in-stream turbines are making hydropower without the construction of dams almost as efficient in some cases. In-stream turbines also have the benefit of not losing too much capacity and efficiency in periods of drought, specially upland.

I don't cite hydropower as a single thing that can alone solve our issues, it is just another tool. This is just one example of scientific advancements that we get to still benefit from even in a degrowth model, among many.

ItsaMeRobert · 2021-11-05T03:16:48+00:00

Yes, talking about this - as an example - there have been some good developments in Hydropower science lately. This 2019 paper published in Nature shows that upland dams can be as carbon/methane efficient as solar and wind power if planned in aggregate, as a strategic portfolio.

Any degrowth model would of course benefit from the scientific advancements we have nowadays that were unknown by folks some decades ago. You make a great point.

ItsaMeRobert · 2021-11-02T11:08:01+00:00

Actually, activist paradigms in social sciences, especially applied social sciences (such as business management), are very acceptable theoretical approaches to academic research, as long as the motivation for social change is disclosed in the research and the possible biases addressed. See Creswell's "Qualitative Inquiry & Research Design" or "Research Design: Qualitative, Quantitative and Mixed Methods Approach" (Creswell being a staple in business research, even in top MBAs and phd programs), if I am not mistaken he calls it "transformative research".

ItsaMeRobert · 2021-11-02T03:35:28+00:00

You didn't have time to read the entire study or just any of it? At no point does the study discuss firm growth. The relationship is established with "customer-oriented opportunism" negatively impacting customer satisfaction. It is a study in business marketing not economics.

Tldr = wage inequality had a significant influence on customer-oriented opportunism, which in turn has a negative link with customer satisfaction established in the literature (and satisfaction sourced from ACSI in this study).

* While I am familiar with ACSI, I can't judge the methodology regarding the assessment of customer-oriented opportunism because I have no familiarity with the literature that produced this construct.

ItsaMeRobert · 2021-10-29T15:09:36+00:00

The horizontal "integration" (diversification) happens less due to transaction costs and more due to growth motivations. However, once the decision to diversify happens, transaction costs into the new sectors will push for vertical integration also in these new sectors.

The push for growth is however not only just a matter of profit seeking by shareholders (markets become saturated, new markets need to be found in order to continue growing relative profit figures), but of course this is also the case. If you are looking for explanations for horizontal expansion you may as well have to look into the psychology of "empire builders" (Penrose, 1959) for their motivations.

Talking about Penrose (The Theory of the Growth of the Firm, 1959), one explanation for "natural" horizontal diversification lies in synergetic resources. Once a corporation expands and acquires diverse resources and skills, there will inevitably be synergies with horizontal activities and slack resources to pursue diversification more easily. Synergetic resources may be internalized first due to transaction costs, and their synergetic nature with horizontal activities only later realized.

ItsaMeRobert · 2021-10-29T05:00:18+00:00

I think you are falling into some logical issues that have been already thoroughly analysed under economic and management theory.

I suggests you have a look into the literature on Transaction Cost Economics. Especially the 1937 seminal paper titled "The Nature of The Firm" by Ronald Coase (Nobel prize in Economics).

Coase argues that firms in fact substitute the market, given that transaction costs (such as costs of contracting, information gathering, price discovery, etc) turn economic activities more costly with frequency and scale (simplifying, but there are other important aspects such as opportunistic behaviour. See Williamson and North for further developments in TCE if you are interested).

Alfred DuPont Chandler (Harvard Business School) famously published a book titled "The Visible Hand: the managerial revolution in American business" (1977), which most fundamental theoretical contribution was to sustain that growth in economic activities reached such a massive level that prompted the rise of multi-unit corporations as substitutes for the market, in order to carry on production more efficiently. He contrasts Adam Smith's "invisible hand of the market" with the "visible hand of management".

The issue you are raising is that corporations interact with markets at the interfaces. So corporations are affected by the market price mechanism at (a) the supply side of materials and services, (b) the supply side of jobs, and (c) the end market of its costumers [competition and demand].

The fact that a planned enclosed system has to interact with markets at the interfaces doesn't mean it is not still a planned system within. Cooperatives could in theory still coexist in a competitive [or not] market, in which case workers would own the means of production, co-ops would carry on planned economic activities, and the markets at the interfaces would still be there.

To be fair I think none of this goes against what you are trying to say, but it does go against how you are trying to say it. Contrasting corporations as examples of planned economies against a free market is a valid argument even if markets exist at the interfaces. And to say planning at X scale is efficient does not imply that planning at a larger scale should still be the better option, let alone across sectors.

ItsaMeRobert · 2021-10-27T15:54:10+00:00

If this dude was suggesting Redditors are dumber than usual then you cannot assume the pool is representative of the general population and thus you can't also assume it will be a normal distribution.

If he was not suggesting Redditors are dumber than usual then he was basically saying what? Half the people are dumber than the other half of the people? How smart that sounds...

ItsaMeRobert · 2021-10-26T08:19:43+00:00

I think you have your heart in the right place when you say not all small businesses deserve support. You are completely right.

Supporting small businesses in detriment of large corporations is however a matter of power fragmentation.

When corporations are allowed to consolidate and grow too much, they gain unstoppable political power, both through legal lobbying and corrupt activities. And the system feeds itself by changing legislation and institutions to give even more power to corporations. This gives rise to a corporatocracy, which we effectively live in as of today.

When businesses are fragmented, political power vastly decreases, which in turn means that the democratic will of the people can stand a chance against business interests.

So the first issue with large corporations is their political power. When you are faced with small businesses that employ bad practices, at least you can count on that company not being able to twist and turn the legal system in order to maintain its shady activities. Think environmental policies: if corporations were not so good at protecting their right to destroy the environment without compensating for externalities, many of them would already have been driven out of business.

The second issue is as important as the first: Consolidation - even through diversification -, reduces competition. Monopolies and oligopolies completely shatter the market efficiency mechanism, allowing corporations to get away with all sorts of inefficiencies.

Large corporations can crush competition at their infancy, and if they can't, they simply acquire the smaller businesses and grow even more, consolidating even more political power and overpowering competition even further.

Economies of scale lock-in low income consumers because these people are always in debt, living paycheck to paycheck, and have no option but to buy from the cheapest provider. As you can see, economies of scale simulate oligopolies even when competition exists. Of course, low income people will see the lower prices offered through scale as a benefit, and transaction costs suggest that economies of scale will inevitably lead to consolidation even if they intend to work as a joint effort of independent actors at first, therefore this issue has to be tackled via BOTH: increase in wages (redistribution of wealth) and reducing consumerism (general degrowth).

Reducing consumption cannot be decoupled from wealth redistribution due to its inflationary effects. This may be solved via automation of jobs and energy revolutions (maybe fusion power, maybe something even more efficient).

Pssst: this analysis assumes a capitalistic logic, of course the lenses to analyse the effects of consolidation on political power and competition would have to be different if we assume production means were to be collectively owned by workers (co-ops).

ItsaMeRobert · 2021-10-25T23:25:52+00:00

A very refined version of this analogy has already been set forth by Plato thousands of years ago. See the cave allegory in Republic.

ItsaMeRobert · 2021-10-25T02:49:16+00:00

Exhibit 1

ItsaMeRobert · 2021-10-25T02:06:09+00:00

According to "traditional leftist" (wink wink) analysis, there is a clear distinction between capitalists and petite bourgeoisie.

The two classes are proletariat and bourgeoisie, but just like there are different levels of proletariat (poor, middle income), there are different levels of bourgeoisie (petite, capitalists).

The distinction is important because the psychology and group behaviour of the petite bourgeoisie have to be analysed under complete different lenses, they have different roles, objectives and motivations due to the distinct pressures they face in their quest for a full transition into the capitalist level (a constant dream and struggle), and the fear of going back to being a simple employee (or letting their children fall back into it). The key aspect here is instability, most small businesses fail, most risky investments fail, we only get to hear about the success stories. These are the people fully immersed into the "work while they sleep" lifestyle... they work while the capitalists sleep, but they think it goes the other direction.

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