J Thomas on July 28, 2010, 06:33:09 am
Sorry to keep yanking this thread off-topic, but J Thomas responded to me and I felt that I owed a reply.  (I probably won't respond to replies to this reply.)

One obvious approach would be to set up a market and ...
Markets are not "set up".  Markets develop when people voluntarily cooperate.

This seemed worth a response anyway. Markets are indeed set up. For commodities, for things bought and sold that can be considered equivalent, each market is originated by a "market maker" or if the market does not start with one, it quickly develops one. Some market theorists argue that this is inevitably better for all participants than a market which is uncontrolled. Their arguments are bogus but they could be right for the wrong reasons -- I have no proof that market-makers are bad for markets. It would be possible for somebody -- a government perhaps -- to selflessly arrange a market with open information about limit orders etc, and without raking off profits and taking risks doing so. I haven't heard that it's ever been tried, though.

Markets that have market-makers but no speculators can run pretty well to the benefit of all involved. Speculators can cause big problems for those who just want to buy and sell at a decent market price, bu it isn't obvious what can be done about them.

J Thomas on July 28, 2010, 06:52:05 am
Were you around when the Hunt brothers tried to corner the silver market?  I remember the cries of outrage by various whiners, but it was obvious (to those of us who knew some economics) that the attempt would fail.  Sure enough, within weeks the Hunt brothers failed, losing about a billion dollars (back when that was real money).  And that was in the US, where brokers/lenders knew that they could be bailed out if the Hunt brothers didn't pay their debts--it would have been even more difficult in a free market.
Odd, the way I remember it is that the Hunt brothers failed because force was initiated against them: specifically, market regulators suddenly changed the rules so that the Hunt brothers had to quickly sell a lot of their equity in silver rather than holding on to it.

In that case it doesn't say whether they could have been successful without the intervention.

With no outside intervention, it would be an example of an attempt to corner the market that failed. That proves nothing, since we can expect some attempts to fail. With outside intervention it proves even less.

The argument is that without government intervention nobody can ever corner a market. This argument could be broken with one example, but there is so much government intervention everywhere that any example from reality would be suspect.

So for example I'd consider the De Beer control of world diamond markets for most of a century to be an example of a market that was pretty much cornered.
  http://en.wikipedia.org/wiki/De_Beers
But how much government action was involved in it? I don't know. Even if there's no proof of government intervention, governments could have acted secretly.

So there is no real evidence, and we are left with argument from logic, which is notoriously unreliable.

SandySandfort on July 28, 2010, 07:39:38 am
This seemed worth a response anyway. Markets are indeed set up. For commodities, for things bought and sold that can be considered equivalent, each market is originated by a "market maker" or if the market does not start with one, it quickly develops one.

When market anarchists say "market," they don't mean a market, they mean the market, that is, the total of all human interactions. This subsumes markets for commodities, information, favors, etc. Of course, brokers (market makers) arise, to make trading more efficient, but Farmer A does not need a market maker to swap his apples for Farmer B's oranges. And it's silly to think of market makers for favors exchanged between personal friends. So most of your argument about the market fail. 

Word to the wise, learn to write more succinctly. Your posts are tedious and full of irrelevant digressions (crap, mostly). Cut the verbosity, and while you are at it, drop the pomposity. You are not going to teach your grandmother how to suck eggs, in this forum. We are way beyond you with regard to the basics.

J Thomas on July 28, 2010, 09:08:41 am

When market anarchists say "market," they don't mean a market, they mean the market, that is, the total of all human interactions.

OK, I would not have known. I don't think of my interactions with my wife and children as "market" although it will be interesting to try out that idea.

Still, traditional markets do usually get set up by particular people for particular purposes. Perhaps they would spring up by accident if no one planned them, but people do plan them and the host(s) make rules for them that the visitors follow.

Clearly that isn't true for every single human interaction, but it's true for markets in the traditional sense.

Brugle on July 28, 2010, 11:51:51 am

When market anarchists say "market," they don't mean a market, they mean the market, that is, the total of all human interactions.

OK, I would not have known.
Darn!  I intended to stop off-topic commenting in this thread, but I find that I must apologize again.  I wasn't thinking clearly and wrote ambiguously.  (And again, I do not intend to respond to replies to this reply.)

Partially, I was thinking of the market, as Sandy described.

But also I was thinking of subsets of the market, such as markets for specific types of goods.  And I maintain that in general, those markets are not "set up" (in the sense of a top-down imposition) but develop from the bottom up as people voluntarily make arrangements to facilitate their trade.  For example, the NY stock exchange was formed by a few people who were already trading stocks and wanted some rules (such as standardized terminology) to simplify their business, and did not have a specific location at first.  Even today, it is not necessary to trade stocks through an exchange--you can go next door and buy stocks from your neighbor, if you agree to terms.

Sure, market makers can make trade easier for people who want to either buy or sell at any time.  For example, an antique shop might be willing to buy (for a price) an item that is essentially identical to an item it has for sale (at a higher price).  I don't know exactly how market makers in stocks make their profits, but it doesn't matter.  Markets exist even when there are no market makers, simply because there are buyers and sellers.

And by the way, I am talking about markets that can be considered reasonably free.  None of this applies to government-controlled pseudo-markets, such as the short-term electricity market set up by the state of California as part of the laughably-named electricity "deregulation" there.

Well, as long as I am replying anyway:
Speculators can cause big problems for those who just want to buy and sell at a decent market price, bu it isn't obvious what can be done about them.
Assuming that you mean that as a general rule, not as something like "I can imagine a possible situation that isn't quite outside the known laws of physics where a speculator could cause a big problem", that sounds like the sort of economic ignorance I'd expect to see in the mainstream media, not on a science fiction forum.  In general, speculators reduce the volatility in a market, which most people consider to be a good thing.  (The simple demonstration of that is in 2 steps: show that successful speculators tend to do more speculating than unsuccessful speculators, and show what the effects are of a successful speculation.)

Aw heck, I might as well give an example.  Let's say that there's a freeze in Florida.  A speculator might find out, decide that orange juice prices were going to go up (more than they already had), and buy frozen orange juice (probably futures, but it works similarly if it's just juice).  The price of frozen orange juice goes up (some more), causing many people to use less and other people to produce more (perhaps by hiring more people to reduce waste during harvesting).  Note that some changes in consumption and production take time--perhaps a manufacturer decides to cancel the introduction of a product that would have been made from frozen orange juice (and other stuff).  Assuming that the speculation is successful, the price of frozen orange juice eventually goes up some more and the speculator sells.  (If the speculator is wrong, then he loses money and is likely to stop speculating, at least for a while.)

Now, what would happen if the speculator hadn't bought frozen orange juice?  The price would have stayed lower at first, more would have been consumed, and less would have been produced.  Eventually (perhaps after the harvest came in), people would have realized that frozen orange juice was really scarce, and the price would have jumped to an even higher price (since inventories would be lower and consumption would be higher).  Without the speculation, the market would be more volatile.

The argument is that without government intervention nobody can ever corner a market.
Straw man.  The argument that I made is that cornering the market for a good, without government help, is very difficult.  Another argument is that attempts to prevent corning the market for a good, by governments, will almost certainly have bad results.

So for example I'd consider the De Beer control of world diamond markets for most of a century to be an example of a market that was pretty much cornered.
  http://en.wikipedia.org/wiki/De_Beers
But how much government action was involved in it? I don't know.
Good example.  I also don't know.  It's hard to estimate how much "excess" profits they obtained.  Notice that they bought competitors at probably inflated prices, and at times flooded the market (which means selling, for a while, at much less than the non-monopoly price).

Still, nobody said that a free market is perfect, just that it is better than a market controlled by violence and threats of violence.
« Last Edit: July 28, 2010, 12:07:56 pm by Brugle »

J Thomas on July 28, 2010, 04:00:05 pm

But also I was thinking of subsets of the market, such as markets for specific types of goods.  And I maintain that in general, those markets are not "set up" (in the sense of a top-down imposition) but develop from the bottom up as people voluntarily make arrangements to facilitate their trade.  For example, the NY stock exchange was formed by a few people who were already trading stocks and wanted some rules (such as standardized terminology) to simplify their business, and did not have a specific location at first.  Even today, it is not necessary to trade stocks through an exchange--you can go next door and buy stocks from your neighbor, if you agree to terms.

Sandy wants me to write shorter and it's hard to give a good short response to this. I'll try.

The NYSE was formed by a collection of *brokers* who agreed to make a monopoly. Here is the problem they wanted to solve. Broker A buys corn from Bert at $1/bushel and sells it to Ernie at $1.05. Broker B buys corn from Emily at $1.05 and sells to Babette at $1.11. Bert and Ernie and Babette compare prices and agree that somebody was rooked. But who? Bert should have gone to Broker B where he could get a better deal. Babette should have gone to broker A where she could get a better deal. If only they'd known, they could have arbitraged among brokers. But when the brokers get a monopoly together they can set one price to buy and another to sell and nobody can arbitrage among them.

The brokers started out meeting together outdoors. The chairman would run through the list of stocks and commodities they covered, there would be some bidding to establish prices, and by noon the prices were all set for the day.

Later when they had more products and had a building, they changed the rules. They wandered around the room making deals with each other.

There is a story that they made the next-to-most-recent system when a broker had a broken leg. He sat in one place with a sign showing which stocks he traded. Everybody who wanted to trade those stocks came to him. He became the first "specialist" who determined prices for a select group of stocks.

What happened if another market tried to compete with the NYSE on one of their products? People could buy from one market and sell at the other. The NYSE had the larger volume, so they were less affected by that. If their price went up then the other market lost stock at a lower price. Then if their price went down the other market gained stock at a higher price. The other market had to offer a larger spread. So investors preferred the NYSE to the other market, unless they were blacklisted by the NYSE. Markets are natural monopolies, for a second market to survive it needs a barrier. the pacific exchange survived by being on the west coast and three time zones away.The canadian market covered some of the same stocks but with the border as a barrier.

They may have been hazy about the details in 1792, but it didn't take 100 years to get market experts designing markets on purpose.

Quote
I don't know exactly how market makers in stocks make their profits, but it doesn't matter.  Markets exist even when there are no market makers, simply because there are buyers and sellers.

Wherever there is enough volume to justify it, for products that are mostly interchangeable, there will be a market maker. Because there are enough people who do know how market makers make their profits that someone will exploit an opportunity if it's exploitable.

Quote
Speculators can cause big problems for those who just want to buy and sell at a decent market price, bu it isn't obvious what can be done about them.
Assuming that you mean that as a general rule, not as something like "I can imagine a possible situation that isn't quite outside the known laws of physics where a speculator could cause a big problem", that sounds like the sort of economic ignorance I'd expect to see in the mainstream media, not on a science fiction forum.  In general, speculators reduce the volatility in a market, which most people consider to be a good thing.

Snip a good example that shows your point. Well done!

OK, I agree that can work out well. In the case you describe, the speculator anticipates a shortage and buys hoping to sell even higher later. The market-maker does this on a short-term basis, and your speculator is doing it on a longer-term basis.

In some contexts this speculator could be considered to be using insider information, and can go to jail for it if he is persecuted and the legal system decides he is guilty.

It might be even better if the manufacturers who will need the orange juice do the speculation themselves. They are ensuring their supply. They pay more now to ensure that they will not have to pay a lot more later or even find it is unavailable. But if they try that they may find that speculators are bidding up the price against them. It's easy to buy at the top.

But this is not what I'm talking about. Consider when the specialist system was strong in the NYSE. You sell to the specialist. Or you buy from him at a slightly higher price. He collects teenies all day. He sets the price. He has the right to set the price to anything he wants, compatible with some rules the NYSE or the SEC may enforce. By the simplest theory he should set the price at a level that leaves the same number of buyers and sellers. Any other price will leave him with fewer trades and fewer teenies. If he raises the price then more people will want to sell and fewer wil want to buy, he will have to buy stock from his own funds. If he lowers the price then more people will want to buy and fewer will want to sell and he'll have to sell at a low price from his own pile of stocks.

But in practice, sometimes his stock may be dominated by speculators who think the price will go up. When he raises the price they want to buy more. When he lowers the price some of them get scared and want to sell. And he has the opportunity to play them like a pinball machine. He raises the price until he gets low on stock. Then he stalls it or drops it some, and speculators sell until he has enough stock again. Then he walks the price up more until he gets low on stock and drops it until he replenishes his stock. And of course he can bring the price down enough to trigger limit stop orders, and then bring it back up.

Whenever there was a scandal about stock market manipulation the NYSE and the SEC agreed that they must make more rules to keep it from ever happening again, so that investors would keep their faith in the market. The rules got pretty byzantine, but never addressed the basic problems.

Eventually NYSE volume got so large that the specialists couldn't keep up. They got automated trading systems and the specialists were allowed to intervene but probably not in definitive ways. The programming for the trading was probably honest. It's quite possible that the system is fundamentally different now.

Quote
Still, nobody said that a free market is perfect, just that it is better than a market controlled by violence and threats of violence.

I completely agree. There can be problems with particular market structures, and they can be very hard to reform if they do go bad. But I can't imagine how violence or threats of violence would be any improvement whatsoever.

wdg3rd on July 28, 2010, 10:41:25 pm

Aw heck, I might as well give an example.  Let's say that there's a freeze in Florida.  A speculator might find out, decide that orange juice prices were going to go up (more than they already had), and buy frozen orange juice (probably futures, but it works similarly if it's just juice).  The price of frozen orange juice goes up (some more), causing many people to use less and other people to produce more (perhaps by hiring more people to reduce waste during harvesting).  Note that some changes in consumption and production take time--perhaps a manufacturer decides to cancel the introduction of a product that would have been made from frozen orange juice (and other stuff).  Assuming that the speculation is successful, the price of frozen orange juice eventually goes up some more and the speculator sells.  (If the speculator is wrong, then he loses money and is likely to stop speculating, at least for a while.)

Now, what would happen if the speculator hadn't bought frozen orange juice?  The price would have stayed lower at first, more would have been consumed, and less would have been produced.  Eventually (perhaps after the harvest came in), people would have realized that frozen orange juice was really scarce, and the price would have jumped to an even higher price (since inventories would be lower and consumption would be higher).  Without the speculation, the market would be more volatile.

Actually, Brugle, that's a rather poor example.  If there's a hard freeze in Florida, the oranges on the trees are unfit to eat as oranges, but they still make fine juice.  The price of the intact fruit goes up, but the price of juice drops.  Even for fruit not grown in Florida.  (I'm from a part of Los Angeles where oranges were still the main industry into my teens, and I picked a lot of them for spending cash -- a hard freeze in Florida resulted in a lot more California oranges loaded into railcars and less crushed into juice).
Ward Griffiths        wdg3rd@aol.com

Men will never be free until the last king is strangled with the entrails of the last priest.  --  Denis Diderot

SandySandfort on July 28, 2010, 11:55:27 pm
Sandy wants me to write shorter...

No, the word I used was succinctly, not shorter. There is a difference.

terry_freeman on July 29, 2010, 02:08:18 am
I think we have come to agreement that dense ("overpopulated") societies might arise whether there is a lot of government or none. The question then is, which sort of society would better manage the available resources? Some brilliant central planner who tries to impose a "better" solution, or the combined efforts of people voluntarily interacting to solve problems as they arise?

History shows that Hong Kong, which is an extremely dense society, and which has next to no taxes, and which certainly does not engage in socialist redistribution, steadily improved the quality of life of everyone, including those at the bottom of the economic ladder. It became so prosperous that people left Great Britain, where socialist redistribution and other market "improvements" were the norm, to seek better opportunities in Hong Kong.

The density of HK is about 6 million people per square mile.  Could you remind me again of what this hypothetical problem was supposed to be?

All attempts to improve upon the market fail due to the well-known calculation problem. The genius planners are taking on a task which is as feasible as the squaring of the circle.

Azure Priest on July 29, 2010, 07:19:27 am
I think we have come to agreement that dense ("overpopulated") societies might arise whether there is a lot of government or none. The question then is, which sort of society would better manage the available resources? Some brilliant central planner who tries to impose a "better" solution, or the combined efforts of people voluntarily interacting to solve problems as they arise?

History shows that Hong Kong, which is an extremely dense society, and which has next to no taxes, and which certainly does not engage in socialist redistribution, steadily improved the quality of life of everyone, including those at the bottom of the economic ladder. It became so prosperous that people left Great Britain, where socialist redistribution and other market "improvements" were the norm, to seek better opportunities in Hong Kong.

The density of HK is about 6 million people per square mile.  Could you remind me again of what this hypothetical problem was supposed to be?

All attempts to improve upon the market fail due to the well-known calculation problem. The genius planners are taking on a task which is as feasible as the squaring of the circle.

On top of that, Honk Kong is a barren slab of rock with a dearth of natural resources, while China and England where government market "improvement" is the norm have a large land area and a great many resources. So it seems that "government knows best" is not the best of models, eh? Perhaps certain figures in Washington should take note?

Back on topic with the comic, whoever suggested that the mass driver would be used as a makeshift rocket  to move the asteroid called it! The only question now is where will the brothers go? To Dactyl? (SLAM), (CRASH) or somewhere else in range of their remaining life support to call for help?

quadibloc on July 29, 2010, 07:47:39 am
Back on topic with the comic, whoever suggested that the mass driver would be used as a makeshift rocket  to move the asteroid called it!
Is it going to be used to move the asteroid? Or will it just move itself and a limited supply of rock? (Admittedly, they don't seem to have a convenient net handy - and duct tape and a knife, or a pressurized tent, would have made that comm in the vest pocket safely accessible.)

The rocket packs don't have enough fuel, and using the mass driver as a cannon to launch one of the brothers is infeasible.

What we saw that inspired them to their solution, whatever it was, was the discovery that the asteroid's gravity was weak - reminding them that they're in space, where Newton's Third Law is a more obvious fact of life than on Earth.

It could be that the asteroid is small enough that moving the asteroid through use of the mass driver is an option. But when they were using it before, they didn't have to be concerned that they were changing its orbit. So the asteroid might be far too massive to move as a whole easily. Or not. But the answer will be spelled out soon, and it probably is moving the asteroid. There's still a little room for surprises left.

SandySandfort on July 29, 2010, 10:08:03 am
It could be that the asteroid is small enough that moving the asteroid through use of the mass driver is an option. But when they were using it before, they didn't have to be concerned that they were changing its orbit. So the asteroid might be far too massive to move as a whole easily. Or not. But the answer will be spelled out soon, and it probably is moving the asteroid. There's still a little room for surprises left.

243 Ida and Dactyl are real; I didn't make them up:

   https://secure.wikimedia.org/wikipedia/en/wiki/243_Ida

Since Ida's mass is 4.2 0.6 1016 kg, A mass driver wouldn't do squat.

dough560 on July 30, 2010, 01:30:32 am
Terry, As I remember, Hong Kong had a .10% flat rate income tax.

It's going to be interesting to see what happens next.

terry_freeman on August 01, 2010, 08:35:36 am
I think you mean 10% income tax rate for HK, not 0.10% rate. I'll have to look up the figures.

John Stossel did a special once. He decided to start a booth to sell t-shirts and coffee mugs from his show in three different cities. One was in the US of A; to make it legal required about 10 pages of forms with 4 or 5 different agencies. One was in India, which invented the concept of "red tape"; he needed an armful of papers rolled in red tape from about 20 agencies, which took a few months to procure, in order to operate legally.

In Hong Kong, he needed only a single one-page form to establish his business; it was, if I recall correctly, a simple declaration of the name and purpose of the business, nothing more.

Rocketman on August 01, 2010, 07:04:17 pm
I don't have it in front of me but maybe six years ago Doug Casey once wrote an article about two different men, one American and one Chinese that both started out the same by creating a business and both doing about as well as the other in running it.  The American dies years later and left his children enough money to have a nice but modest home, while the Chinese man who dies at the same time left his family about one hundred million dollars.  Now you know why everyone who is anyone thinks China is going to kick America out of the supreme power position within the next fifteen years or so.  
« Last Edit: August 01, 2010, 07:06:08 pm by Rocketman »

 

anything