what ever happened to supply and demand?
If there is such an overstock and low demand, shouldn't car prices be lower?

Also, I've seen similar pictures in port cities (L.A. for example) where they have to store cars that come off the boats before they ship them to their land-locked destinations.

Those drones fly almost as high as our defense industry stock prices!!! Muahahahahaha. We'll follow the law alright, the law of supply and demand -- and our clients demand drones !! Where was the talk of "government shutdown" when we had a Syrian war to sell? (p.s. that salesman is fired.)

Taking the term "free market", as it's generally regarded in moderate economics circles, at a literal sense misinterprets its actual meaning. A good analogy is Creationists who cling to the notion that because evolution is regarded as a 'theory', given the colloquial definition if it, it is in dispute.

The key point of free market is voluntary setting of prices through of supply and demand by consumers and producers generally unhindered by external forces. However, a sub-field of this, market failure, deals with exceptions to the rule.

For example, negative externalities where production is incentivised beyond societally desirable equilibrium norms because costs are not bourne or captured by the producers who produce these goods and the consumers who consume them (e.g. carbon emissions).

Alternatively it also focusses on the supernormal profits that can be borne by producers who hold too much market power in monopolistic, oligopolistic or duopoly microeconomic market structures (such as what this examples presumably is, with some rent seeking thrown in on the side).

@Rufus so, freedom, to you, is synonymous with pervasive violence? Is that what you were told as a small child?

Hey, if only government just protected our lives and property, I'd be very happy about it. You do realize that's roughly why libertarians often talk about a limited government, right?

Too bad it isn't limited at all, far from it. It uses violence a lot more than it should, in ways you don't know about or haven't carefully considered. Probably both. Hell, it even scared you into fearing freedom.

@petpeeved so you're saying government price fixing by bureaucrats is the solution, because they're better judges of "real world supply and demand" than the collective judgements of millions of people trading vigorously every day? Wow, if only it was you running the centrally planned economy of Soviet Russia, I bet we could have stopped its apparently avoidable collapse.

You think the health and healthcare industry is "unfettered capitalism"? That's so delusional I don't know where to start. It's one of the most regulated industries in America. That's government intervention for you. Why do you think there's so much disgusting lobbying for special interests? Because government is everywhere, you can't move an inch without greasing the hand of a dirty bureaucrat.

Get government out of healthcare, and there will be no laws to protect the crooked big businesses. Let the industry compete with higher quality and lower prices, like any business tends to do in less regulated environments.

It sure seems to me that currently, unfettered "capitalism" is in full swing in the health care industry and what the administration of health care facilities truly fear and lobby so furiously against is the standardization of health care costs based on real world supply and demand, not prices conjured out of thin air from some mysterious Chargemaster grimoire.

The health care industry has no incentive to change the current model. Why would they? Could a CEO or executive board of a hospital get traction for disrupting the current status quo when it is so obscenely profitable? I think the answer is obvious that there will be no systemic changes from within the health care industry which leaves just one possible source for market correction: government regulation.

Leaving aside the argument about whether Medicare is more efficiently administered than private health care and actually costs far less money (it is), don't you think it would be a good thing to have a watch dog organization whose sole purpose is to analyze the "Chargemaster" and make the health care industry actually accountable to the free market?

It sure seems like "Chargemaster" is just a new word for that time tested practice of free marketeers since the Boss Tweed days: price fixing. Anti-trust law actually helps create a true free market and we are in desperate, desperate need of it in the medical industry.

Cutting back on light pollution isn't too hard if lighting and building designers and the like would just care. For highlighting a building, rather than have lights pointing up, put the lights under the eaves pointing down. (I actually don't get why people light up their houses so much, especially if there are street lights nearby as well, that makes that much more light for a thief to have in the house without having to use a flashlight or turn on lights or anything else to give away their activity, plus it just doesn't make sense to me to highlight a house 99.999% of the time) Along the sidewalk of the local shopping center strip, they have these big 3' round lights shining light in all directions, but if they simply capped it, and had a reflector on top to direct light down and around, they could achieve better light distribution for pedestrians for far less energy, a win all the way around for them. Light is still reflected off the ground up, but isn't as intense. Street lights can be made to cause less glare and direct light better, which again saves energy while keeping the light needed for the road just as good if not better. The problem is, those fixtures aren't widely used yet, so they cost more than the normal ones (supply and demand working out there, plus just gouging). I would bet that even a major city could greatly cut their light pollution down without sacrificing safety, and perhaps increasing it, and saving energy with just a few steps. Problem is most people don't know much about it, nor care, save for those of us who would love to have a nice telescope, but find it hard to justify especially when the skies nearby aren't dark enough... Really just need to start modifying zoning laws and restrict accent lighting and do better on street lighting where/when needed (and cutting it when not needed, which is perhaps far more often the case, since it is usually just a security blanket while not providing any security at all)... But yeah, since that isn't likely to happen, not much is likely to happen and those of us wanting to see the night sky in its glory are stuck with long drives...

@VoodooV It's not surprising to me that opponents of free markets characteristically lack an understanding of basic economics or just how incentives affect human behavior. And I'm not even an economist or a psychologist.

If a criminal has a gun to your head, and there's a policeman at the scene who is friends with the criminal and let's him do whatever he wants and leave, which one is worse?

VoodooV, would you steal, rape, or even kill if I were the law and promised you could get away with ZERO repercussions? If you do commit a crime, you'd be to blame, but wouldn't I be to blame even more for not only promising but letting you get away scot free?

It's human nature. Wall Street committed fraud on a large scale, and government was in on it. Is Wall Street to blame for the fraud? Sure, but why did they do it without any fear of loss to make them think twice? Because they knew government was letting them get away with it, which they did, no bankruptcies, no arrests.

As a college, would you turn away the opportunity of making more money by increasing tuition costs if the students weren't sensitive to the prices you charged?

Likewise, if you were a grocer selling apples, and your customers were being subsidized by free loans for apple consumption, wouldn't it make your life a lot easier to charge more for apples if no one ever complained about the price?

"Back then", college tuitions were a lot cheaper, look it up. You'd expect tuitions to become cheaper with time just taking into account the technological advances, economies of scale, etc., but prices have inflated monstruosly despite these forces.

Would you rather worry that the mechanics of supply and demand won't solve society's needs for education overnight, or that cheap loans would make the cost of tuition increasingly and absurdly high for society, even contributing to an economic recession? If the goal is to make education more accessible, wouldn't it make more sense to let education become cheaper, rather than enforce a policy that led to an ever increase in costs?

That's a nice theory and all about tuition is high only because of government involvement. Let's ignore the fact that it takes two. It takes government grants to assist those in need, and it takes the colleges to say "well fuck it then, let's just keep raising prices then if government is going to help out"

Schiff seems to forget that a lot since he made the same argument about wall street. Wall street keeps doing bad things, but it's the government's fault for not stopping them. Maybe if wall street stopped doing bad things, the government wouldn't need to stop them.

It takes two. But one organization is trying to help, the other organization is just trying to get away with having more money. So you tell me which one is worse. If a criminal has a gun to your head and says he will shoot you if you don't do X. If you refuse to do X and the criminal shoots you, who's fault is it? Yeah it's the fault of the fucking criminal with the gun to your head!!

The idea of removing government grants to education would have the effect of lowering tuition costs actually is something I might support. It's a sound idea. Problem is, what do you do in the meantime while you're waiting for the effects of supply and demand to kick in. Government pulls its money from higher education, and supposedly colleges will be forced to lower prices since much fewer people will be able to attend. Stuff like that doesn't happen over night, you're going to have a large gap where a ton of people will not be able to go to college for a significant period of time. What do you do about that?

I quite honestly don't think it will work. Colleges originally never had government support and did they lower prices to let the peasants in back then? Nope. Colleges were the home to the rich and the affluent. If you like the idea of only the rich getting an education, then proceed. If you like the idea that wealth shouldn't be a factor in education, then we need a better answer.

Being someone who has done as much downloading as I have (and will probably continue to do so) I don't think I'm in a position to complain about it too much. If I were a writer, artist, or musician and I was making enough to make a decent living then I'd probably shrug off the rest and be happy that people were actually paying attention and get on with my life. I think the digital age has really thrown many of us for a loop, I can't remember if there was a time in human history before this when we were able to reproduce a product at virtually no cost and yet our thinking is still heavily rooted in the concepts of scarcity and supply and demand. So our entrepreneurs and our business tycoons spend centuries perfecting the art of manipulating these market forces and have suddenly run smack into something that is shiny and new and also resistant to the old ways of doing things, chaos ensues.

@rbar np, take your time, I'm quite busy as well.

Did East Germany have a great economy? Like you said, it faired well in some sectors, highly subsidized sectors I might add, at the huge expense of the rest of its economy which was miserable compared to West Germany (or to what it could be if it were capitalistic). Think of all the "luxuries" enjoyed right outside the Berlin Wall that were denied to east germans. Can you see purchasing or providing those products and services as economic activity being denied, and, therefore, less cooperation?

You have to question your assumption that capitalism universally strives for competition, or that it always should, or that it's the philosophy of free markets to make everyone compete. There are forces *for* and *against* competition everywhere in capitalism, from those who benefit and lose from it, respectively. I think that's what you mean by "near perfect competition", the perfection being the balance between competing and not competing as required.

Why are labor unions formed? So workers can compete less with each other and cooperate for better employment terms. Does that favor companies? No, but who cares, it's meant to favor the workers. Why are cartels formed? So companies can compete less with each other and cooperate for better profits. Is that good for the consumers? Usually not, but it's good for the companies in the cartel. Why are consumer groups formed... you get the point. These institutions operate against competition, but that doesn't make them any less capitalistic or contrary to the incentives of free markets, assuming they're formed without the use of force, criminal or lawful. A lawful association between individuals or companies to cooperate instead of compete with each other is capitalism at work too.

When you talk about situations where there is less or no competition, you're not considering the competition that arises on the other side of the demand-supply relation!

If there is large demand and little supply, you correctly point out that there is little competition *among suppliers*, right? However, aren't you overlooking the increased competition among the *demanders*? Like I said, competition is increasing as supply and demand differ. Who is competing with whom is beside the point.

You might argue, "well, how is competition among the demand going to help??", because it sucks to be in the demand for something in low supply, that unmet demand represents an incentive for more supply. Supplying something in high demand is a coveted position. Resources from elsewhere will tend to be allocated towards that coveted position, supplying that demand, and increasing competition in what started out as a less or non-competitive environment.

So, I don't follow your "markets universally tend towards monopolies" argument. As much as companies like monopolies, they like it because it profits from the clients/consumers' desperate demand for it, but these people are not ok with fighting each other for something in low supply. THAT is the incentive towards competition, towards destabilizing any monopoly that abuses its position.

The derivatives market is a complex example, but you're blaming the "free market", when the banking system is far from a free market if there's a central bank. Banks should be allowed to make risky investments and, if these investments don't pan out, they should pay the price with loss and bankruptcy, like it happens with any business that makes bad decisions. That is one of the best incentives to make good decisions! If the whole banking system is to blame for that, then it would collapse, which would be disastrous, but it would expose the disaster that is central banking.

Would the government want society to realize that central banking is terrible? Of course not, they're the ones who profit from it the most, which is why it stepped in with a massive taxpayer-funded bailout. None of what I just described is allowed in a free market.

Just like people realized the Church and State should be separate centuries ago, it will take a while for people to realize the State and Banks should be separate as well. The evidence is unravelling right before us.

@renatojj Apologies for the late reply, have been running for work and it doesnt look like that will stop

True that some countries may have less cooperation, though is that dependent on the economic system used or something else? For instance, East Germany had 100% employment and a very active economy, more so then west Germany in some regards. It was ofc run top down with little choice and politically biased, but I am not sure if that lessons the amount of economic transactions, ie cooperation. I guess it comes down to what you define as cooperation.

BTW "those criticisms of the depletion of finite natural resources consists of the economic Law of Diminishing Returns, opportunity cost, and scarcity in economics" -- I never understood what they mean with that. Even if the resource cost goes up strongly due to scarcity it doesnt mean that that resource can be replaced by something else, or that the higher cost (than the original cost of the scarce resource) of the replacement can be born by its consumers.

Now you say something very interesting: I agree with you that capitalism isnt always about ever-increasing competitiveness, in practice. In cases where you have competition, you get ever-increasing competitiveness. (This is in theory what all capitalism strives for) In cases where you do not have competition you dont. That is exactly what we are talking about. Free market philosophy assumes there is always near perfect competition right? How else would the market balance itself if there is no competition? Would you agree that free markets only work where there is competition?

Lets see when we have competition:

"competition is proportional to the difference between supply and demand" That doesnt sound right. If there is large demand and little supply (the difference is big), there is little competition as all suppliers will overcharge like hell as they will be able to sell anything they can manufacturer anyway. If there is large supply and little demand there can be competition, though usually this results in companies leaving the market until you have: If the supply and demand are about equal, you SOMETIMES have competition that keeps things in balance. Or you can have a monopoly for whatever reason and that market has again little to no competition. In other words, in no single scenario is competition guaranteed. Actually, there is good reason to assume markets move to monopolies naturally in all cases. In a market that is turning from early adopters to mass market, there is always focus on economies of scale. Companies need to get bigger to make sure they have the lowest cost price (best competitive edge) and to keep their shareholders happy as they demand growth to make their investments worth more. Bigger companies means fewer companies on the long run, as the market is always limited. This means companies will take over other companies until only a handful remain. Voila. Actually, if it werent for (anti-free market) anti-monopoly rules lots of markets would only have 1 company left. That company would be so big it would be impossible for a new entry to push them out of the market or even get a foothold unless the market itself crumbles because a newer range of products exist that make the old one obsolete. Again, without rules governing economies, things just go bust.

Which was what happened in the derivatives market. It was a completely deregulated market that was exploding itself as there were no rules governing it. When it did explode (ie when the free market failed) there were 2 options left: Let all banks fail or bail them out. Think of the consequences of following your recommendation: If 1 bank fails, it will pull the others down with it as they are all strongly interconnected. As banks are key in the economical world, the entire system would collapse. The amount of devastation would be huge, would probably kill the entire system. Now, you can argue that would be good for us, as we could build a fully new system. But before we would get there, there would be years if not decades of nightmares.
I agree with you that the fall of the derivatives market should never have happened in the first place which is exactly the reason to not follow free markets.

Above clarifies a bit my way of thinking: for many of these markets (be it banks or utilities or employment) the consequences of letting that market fail are just too big. If you have the guts to follow free markets to the end, it might work (isnt proven though) but you come to a point where you destabilize your country in such a manner that things like revolts and all kind of nastiness are highly possible and even likely. That is not progress, that is barbarianism.

You mention yourself that there are practically no free markets anywhere. You say that is because they havent been tried. I say that they have been tried again and again but never last.

@rbar I didn't call you a socialist, I don't know you that well! It was about your portrayal of capitalism. Also, I apologize for referring to free market capitalism, subject of this topic, as just "capitalism", that caused understandable confusion. I completely agree with you that some of those "isms" fall under a broader definition of capitalism, as they're social orders dependent on private property rights. Those who advocate free markets like me, however, really tend to consider free market capitalism as the only real one, while variations are just "less capitalistic" or not capitalism at all.

Any economic system is as cooperative as the next? Hmm... I don't know, rbar. Would you say there's as much cooperation inside North Korea as there is in South Korea? The old East and West Germanies? Surely any country with a lesser economy enjoys much less cooperation of their citizens among themselves (or with other countries) than a country where policy favors economic growth, no? Very common in North Korea, the "do what I tell or you'll starve in a concentration camp" approach, just isn't my favorite definition of cooperation. Coincidence or not, their economy is shit.

You raise a very important issue of limited resources, that wikipedia article on Capitalism explains better than I ever could, that counter-arguments to "those criticisms of the depletion of finite natural resources consists of the economic Law of Diminishing Returns, opportunity cost, and scarcity in economics". Interesting stuff.

My issue is with you portrayal of capitalism as ever-increasing competitiveness, because it's kind of biased and overlooks the abundance of cooperation. Imagine looking at a crowded night club and describing it simplistically as "a bunch of people struggling for the attention of the opposite sex". Seems pretty accurate if one hates night clubs. There is competition going on, specially for the most popular people, but what about all the other people enjoying each other's company over drinks, talking, flirting, and laughing, couples making out and enjoying the music on the dance floor? Who would describe those activities as purely competitive?

There is a lot of supply and demand in a capitalistic economy, not trying to sound like an economist, but competition is proportional to the difference between supply and demand. So what about where supply is meeting demand, should we just overlook the huge amount of cooperation happening there?

I find it amusing that you ask "What? What policy?", then, at the end of the same paragraph, write "The way the bailout happened is ... utter crap, but that is a different story all together." No, it's not a different story, the bailouts are government/central bank policy, partly the answer to your important question. Stepping in and handing out money to bankers who should have been punished by their excessive risk-taking with bankruptcy, is the exact opposite of letting free markets work.

To try to answer your persistent request for examples of free markets, if you didn't realize it yet, free markets are not very compatible with central banks, institutions that have a legal monopoly over what happens to half of a country's economy (usually half of all economic transactions involve money). Now, do you know how many countries have central banks today? Except for Monaco and Andorra, all of them.

Centuries ago, there wasn't a single country in the world where people enjoyed freedom of expression. That fact could be considered an obstacle to its adoption, but never a testament to its impracticality.

Yeah legalize it.

It's ridiculous how much money is spent trying to combat a substance that is in more ways than not safer or has greater benefits than alcohol. Estimates vary but most reviews I've seen range the cost of combating such a 'drug' as more than $10 billion per year in the US alone.

Example:
2010 had the US spend $15+ billion at Federal level and another $25+ at state level on the war on drugs.
That's $40 billion that could go towards medical, social, education programs, or even to work towards paying off some depts.

This site's stats seem to be including more than marijuana, but at near the end of April 2012, the total is already over $12 billion, almost 13.
http://www.drugsense.org/cms/wodclock

An estimated 50% give/take of citizens have used or use the substance.

Supply and demand encourage drug syndicates to form and become more ruthless in their enterprises, the prohibition on alcohol is a decent example.

The substance when consumed is significantly safer with heavy machinery like public driving etc than alcohol (not saying that driving stoned should be encouraged, but far less dangerous then alcohol), and it's common place behavioral effects leave the consumer with greater control re social behavior and better rational processing opposed to alcohol when high levels of the substances are compared.
Not trying to smash booze, just highlighting that if 1 is acceptable, then the other dam well should be as well.

Governments allow smoking Tabasco to be legal because of the taxation/financial benefits despite the well known and documented issues with the substance.

The medicinal properties alone should be enough to give the substance leeway that most other recreational drugs wouldn't receive.

Rather than spending money against it, regulating it would make it safer for use while also turning a profit for the government and being legal it could then be taxed to further the financial return.

As far as i know, no one has ever died from an overdose of marijuana.

I personally haven't used it for a few years (save the rare one-off opportunistic occasions) but am a strong advocate that it's a good and/or reasonable substance for personal use.

I love how the comment thread is almost entirely about hybrid car battery failure, and not about gas prices or politically-motivated spin.

For me, these clips are cause for a bit of soul-searching. I honestly don't recall exactly what I was saying about gas prices in 2008, but I certainly was saying Bush was at least partly to blame.

I didn't really have much proof of that, it was mostly "Bush is an oil man, and under his Presidency gas went from $1.50 to $4, so he's got to have something to do with it."

Mostly though, I think the real answer is that we do live in a free market economy, and oil price is set largely by supply and demand. The global supply has been flat, and possibly declining, while demand has been growing (mostly due to economic development in places like China and India).

The truth is we should have been making serious attempts to get ourselves off oil since at least the 70's, and because we've let Big Oil and their political allies have their way, worldwide, we're now reaching the point where the consequences of our apathy and/or defeat are becoming impossible to ignore.

Now it gets to 80 degrees in March in Ohio, gasoline costs $4/gal, and still the only remediation our political system seems likely to implement is more investment in oil production.

That could change quickly, of course. All we really need is for the right to wake up. Or drop dead. I'd be satisfied with either one at this point.

Yeah, I get that. usually the left is calling for more than "some" regulation.

As the scamulus proved, collusion between government and banks is also possible.

Also, "merriment". Good word.


>> ^Bradaphraser:

I think the point dystopianfuturetoday is making is that when regulation is reduced, there is ALWAYS collusion. Adam Smith understood this. "Two men of the same trade cannot meet, even for merriment and diversion, without the conversation ending in a conspiracy against the public."

The general idea is that SOME regulation is necessary to ENSURE that supply and demand are driving prices, and not guilds and cartels.