Re: U.S. deficits fine -- Nobel laureate
royls_at_telus.net
Date: 12/19/04
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Date: Sun, 19 Dec 2004 23:50:06 GMT
On Mon, 13 Dec 2004 13:43:17 GMT, Igor <jjweatherby@houston.rr.com>
wrote:
>royls@telus.net wrote:
>
>> On Sun, 12 Dec 2004 10:33:13 GMT, Igor <jjweatherby@houston.rr.com>
>> wrote:
>>
>>>royls@telus.net wrote:
>>>
>>>>On Sun, 12 Dec 2004 06:01:56 GMT, Igor <jjweatherby@houston.rr.com>
>>>>wrote:
>>>
>>>>They aren't going to sell for less than they cost to make, no matter
>>>>how little they add to productivity, and if they don't add to
>>>>productivity, money spent on them will not add to corporate value, no
>>>>matter how much of it shows up on the books. That's what you can't
>>>>seem to understand.
>>>
>>>No what you do not understand is that THERE IS A MARKET FOR CAPITAL
>>>ITEMS.
>>
>> No, what _you_ and Prescott do not understand is that the market price
>> of past capital purchases is not what determines the extent of their
>> current or future contributions to a firm's profitability.
>
>No you still do not understand that the equation you had a problem is an
>equation that states RETURNS on two different types of capital. RETURNS
>HAVE EVERY THING TO DO WITH WHAT YOU PAID FOR IT.
Yes, but you find your return by _dividing_ by what you paid for the
asset, not _multiplying_.
Idiot.
>Your flow of profit is
>your return to your assets.
Return is profit _divided_ by assets, not _multiplied_.
>I really tire of trying to explain your many misconceptions to you.
You have no idea how tired _I_ am of trying to make myself believe
that your misconceptions can really be as profound and comprehensive
as they are.
>It is obvious you have little knowledge of economics and do not wish to
>change the fact. You scantly understand what George argued.
You have proved that you understand it not at all.
>So if you
>can not understand a book without equations explaining theory I am not
>going to waste my time explaining what an equation means to you.
ROTFL!! Took the words right out of my mouth.
>>>To say that it will not price under marginal cost is obvious
>>>and illrelevent to the discussion.
>>
>> No, it is not. Marginal cost represents a floor cost, but _not_ a
>> floor _value_ of their contribution to a firm's productive endeavors.
>> That is the fact you and Prescott ignore.
>
>IT IS A STATEMENT OF RETURNS.
No, it is not. Adding more costs does not increase the rate of
return, it _reduces_ it. I don't know any simpler way to say this.
>COST OF THE CAPITAL GOOD DETERMINES THE RETURN.
By division, not multiplication.
>WHAT PART OF RETURN DO YOU NOT UNDERSTAND.
The part where spending more money increases returns, without
increasing profits.
>It is calculating
>dollars returns NOT PRODUCTIVITY OF CAPITAL WHICH IS A DIFFERENT ISSUE.
You're telling me?
>A dollar return compares your AFTER TAX REVENUE GAINED TO THE COST OF
>THE ASSET.
Gibberish.
>You see that is why taxes are included in the equation.
>PRODUCTIVITY IS MEASURED BY DIVIDING OUTPUT BY THE AMOUNT OF THE INPUT.
Right. Dividing. Not multiplying.
>THE EQUATION IS NOT LONG RUN PROFITS. IT IS A FLOW OF PROFITS.
No, it isn't.
>Your flow
>of profits is YOUR RETURN ON YOUR ASSETS.
No, it isn't.
>IT HAS EVERY THING TO DO WITH
>ACCOUNTING AND NOTHING TO DO WITH PRODUCTIVITY.
Or economics?
>More productive capital
>gives you higher return therefore $1000 invested in more productive
>capital is give you fewer units that $1000 invested in cheap crappy
>capital. Yes supply is also an issue but which is why forms of capital
>disappear. Outmode useless capital is not demenaded people quit making
>it and move to making capital that is modern and wanted eventually the
>price rises so high no one will buy it.
?? "It's so crowded, no one goes there anymore!"
ROTFL!!
>Captial that is not completely
>out moded but slightly less productive will sell at a lower price. It
>will have less demand and usually will have less production cost.
Demand does not determine production cost.
>Anyway I have wasted way to much time and you can not begin to grasp the
>argument.
Back atcha, idiot boy.
>>>If the markets for capital goods are
>>>imperfect they will be priced above what it cost to make them. When a
>>>firm list $1000 in buying new capital IT IS RARELY PRODUCED IN THE FIRM.
>>>How many construction business do you know that MAKE THEIR OWN TOOLS.
>>>How many electrical companies MAKE their own generators? This is not an
>>>issue of transfer pricing it is an issue of how markets will determine
>>>PRICES and RENTAL rates for capital.
>>
>> No, it isn't. It's an issue of how well managers utilize the
>> potential productivity represented by past purchases of capital.
>
>Then you lose again.
All I lose is the time I waste trying to get you to understand
economics.
>If managers reach technical efficency they will all
>use the most productive capital meaning they all have similar capital
>that is similar prices.
And if you had any brains, you'd be educable.
>So your argument $1000 of mud pies is not as
>good as $1000 of apple pies does not matter. NO ONE WOULD BUY $1000 of
>mud pies.
The same people who buy lottery tickets wouldn't spend $1K on the
capital equivalent of mud pies? I think you need to consider
including some facts of objective reality in your theory.
>If they did market analysis would tell us those who chose to
>do this got more utility out of $100,000 mud pies at a penney a piece
>than 100 apple pies at $10 a piece.
Or not.
>>>The rental depends on the
>>>productivity of the asset and the depreciation caused by used as well as
>>>how many people want to rent it.
>>
>> No, the "rental" does not depend on the productivity of the asset.
>
>You claim to have read and Understand George and you make this argument?
Yes, because I know, as you all too obviously do not, that what you
call "rental" is not economic rent.
>You better go back and read what rents is all about. I would start with
>Ricardo On the principle of Taxation read the chapter on rents.
Rent has nothing to do with depreciation, idiot boy.
>> At best the rent depends in part on
>> the asset's _potential_ productivity. That is another fact you and
>> Prescott ignore.
>
>Even if it is in part more productive assets will highly more demand and
>likely higher prices.
?? Uh, OK, I think I can do that, too:
But if you did that other part productive was not the only assets, and
highly assets of price never did that demand for a higher one.
Pretty good, huh?
>>>Returns on other assets and forms of
>>>capital will affect price. If capital markets are perfect then EQUAL
>>>returns on investment will be made.
>>
>> You and Prescott assume they are perfect, in the face of the obvious
>> fact that they aren't.
>
>You do not even know what perfect means.
Yes, I do, and I can prove it:
You are a perfect idiot.
>Must less why in modeling the
>assumption is made and how it still fits the evidence fairly well.
Garbage.
>>>Many crappy capital sells CHEAP.
>>
>> And much capital that does not sell cheap is nevertheless crappy in
>> its contribution to the firm's profits. You and Prescott ignore that
>> fact.
>
>Why is this?
I guess because it does not fit your theory.
>Evidence?
Penn Central. Atari. Pan-Am. How big a list do you need?
>Why would PEOPLE PAY A HIGH PRICE FOR CRAPPY
>CAPITAL?
Because they aren't perfect.
>YOU DO NOT PAY THE SAME AMOUNT FOR A MACHINE THAT ALLOWS YOUR
>WORKERS TO PROCUCE 2 UNITS AN HOUR AS YOU DO FOR A MACHINE THAT ALLOWS
>YOUR WORKERS TO PRODUCE 4 UNITS AN HOUR. This is irrational.
Wrong. It depends on _all_ the costs, and how much you can sell the
units for.
>Any
>business who paid high prices from les productive capital when he could
>buy more productive capital for the same price or a little more would be
>OUT OF BUSINESS.
Well, Hallelujah! There is a functioning brain cell there, somewhere!
Now, all you need to do is take a couple of months off work (I'm sure
it will do your students a power of good) to think about whether any
companies went out of business after 1929.
>>>I had never thought of that.
>>
>> Yes, well, that does not surprise me.
>
>Obviously tongue in cheek statements are beyond your ability to detect.
Or is it that tongue in cheek responses are beyond yours?
I know where I'd put my money...
>>>There are cases
>>>where this may be the case. Say for instance a farm in Mexico versus a
>>>farm in the US. In the US you buy the tractor and hire fewer workers
>>>because labor is expensive. It makes sense in Mexico they may use
>>>shovels because the tractor is too expensive and the labor is cheap. So
>>>to assume a priori that using 500 or a thousand workers instead of 1 or
>>>2 units of labor and a tractor is going to be more expensive is NOT
>>>always the case. In this example the difference was extermely but we
>>>could have had a example where the more productive capital was 1.5 times
>>>as expensive.
>>
>> You miss the point. There is no law that says American or Mexican or
>> any other executives always buy the right kind of capital for their
>> firms.
>
>Oh yes there is.
You have just proved that you are an idiot.
>NATURAL SELECTION. Firms that do not emplore the right
>technologies are either driven out of the market or bought out by those
>who do.
?? <sigh> And this millennia-long process was just coincidentally
completed some time before 1929, was it? And all the firms driven out
of the market in the 1930s were some kind of illusion, a mass
hallucination, because by that time all managers had evolved to the
point of perfection??
"Idiot" somehow seems too mild in this instance....
>You can not compete if you buying $1000 shovels and using them
>when you smarter competitors are buying $1000 backhoes and using them.
Wrong. You can if you get the work and your competitor doesn't.
>Firms that fail to adapt to better technologies lose market share and
>therefore are bought out by a firm who can more profits than current
>management or are forced out of the market because they CAN NOT MAKE
>ECONOMIC PROFITS. Profit maximization says that firms will find cost
>minimizing production or be driven out.
When exactly was that market selection process complete?
>>>>>The paper showed RATIONAL EXPECTATIONS WORKS.
>>>>
>>>>ROTFL!! It showed only that false assumptions are not made truer
>>>>through being consistently adhered to.
>>>
>>>If you had RTFM you would have realized too things. First you had no
>>>clue to what the equations in the second section where getting. Simple
>>>algebra even escaped you much less taking a derivative to see that
>>>decreasing sales WOULD NOT LEAD TO HIGHER PROFITS as you claim the model
>>>predicted.
>>
>> You are lying again. I did not claim decreasing sales would lead to
>> higher profits in the model.
>
>You made some argument like that.
Thank you for admitting that you lied.
>Do you not recall after seeing the
>equation profits = iKT + (1-g)(1-t)KI making the statement that
>increasing your ouput DROPPED profits because g is the trend rate of
>output growth? Do yo not reacall that.
Do you? Maybe you could find a quote to that effect, in order to have
some chance of convincing someone reading this that you are not a
lying idiot.
>Simple algebra tells you if
>iKT>(1-g)(1-t)Ki positive profits exist even if g>1.
<snicker> What happens if g<-1?
>>>>>People set expectations
>>>>>and act on them. People saw the increases in taxes by Hoover and the
>>>>>movements the Fed was making and knew to expect a negative impact on the
>>>>>economy. THAT IS WHY PRICES WERE FAR LOWER THAN EARNINGS OR EQUITY.
>>>>>PEOPLE EXPECTED PROFITS TO FALL AND WERE SELLING BEFORE THE CRASH.
>>>>
>>>>IOW, Prescott's fundamental assumption is that government officials
>>>>can make bad decisions, but corporate executives can't.
>>>
>>>No. The assumptions are that PEOPLE SET EXPECTATIONS.
>>
>> Lie. The assumption is that those expectations are met.
>
>No it is not. IT IS THAT PEOPLE CAN SET EXPECTATIONS CORRECTLY.
ROTFL!!!!!!!!!!!!!!!
>This is
>not sunspot equilibria that says if people believe something has an
>effect then it will. This says people set expectations given current
>information and THEY CAN INTERPERT THAT CURRENT INFORMATION TO MAKE
>ACCURATE PREDICTIONS ABOUT THE FUTURE.
Which must be why no one lost any money in the dot.com crash...
>>>Expectations are not always correct sometimes people
>>>get surprised.
>>
>> Except in Prescott's model.
>
>ABSOLUTELY WRONG. YOU DID NOT EVEN READ THE CITATION FOR THE PAPER THAT
>WON THE NOBLE DID YOU. This is what time inconsistency is all about. It
>says inconsistent policy surprises people and causes expectations TO BE
>OFF. There is nothing about these results that says expectations ARE
>ALWAYS 100% right.
Except the assumption that profits depend on spending more money...
>The extrapolation of the results which is MINE not
>Presscot's is that the fact stocks were undervalued meant people saw the
>recession coming and tried to dump stocks before profits and dividends
>drop.
?? That's called being overvalued, not undervalued.
>In other words they tried to sell while they still could.
Because they had to get out of those undervalued stocks before the
price went up. Got it. <wink>
>That is
>why the market was undervalued. People correctly expected a future drop
>in profits and tried to sell stocks before profits and dividends
>dropped. So they could invest in assets that would perform better under
>the coming conditions.
So they sold their undervalued stocks in order to buy overvalued
stuff. Check. Sure sounds like their expectations would have to be
correct...
>>>Read something besides Henry George.
>>
>> <yawn> I have read, I daresay, more economic theory and history than
>> you. Certainly I have understood it better.
>>
>> My advice to you: read Henry George. Or if you have, read him again,
>> until you understand him, because you very obviously don't yet.
>
>As usual, those who are uneducated in an area try to brag about how much
>they have read and know. Your post show this statement is a
>misconception on this part. You misunderstand some FUNDEMENTAL concepts.
>The reality is that it is easy to fix if you admit it. If you are
>willing to understand a couple of concepts instead of having the
>attitude you can not be wrong you would be on the right track.
Oh, I admit I can be wrong. I was wrong when I assumed you could be
educated.
>>>Catch up to the last 100 years of theory or at 70 years and you will
>>>begin to understand the model.
>>
>> I understand the model fine. I just don't believe it says anything
>> interesting or relevant to the real world.
>>
>No you do not. It is obvious from your statements you do not have a clue
>and have not even read the paper. How can you understand the model when
>you have read the paper?
You claim to have read the paper, and you obviously don't understand
it.
>>>That is often the problem with the lay
>>>person reading something like Presscott they do not know the basic
>>>theory needed to understand the model and its results.
>>
>> I know Prescott's theory: government can do nothing right, private
>> interests can do nothing wrong.
>
>You are so far off. This is not even theory. Not even application of the
>theory Prescott uses.
The assumptions of the model make it very clear that is his theory.
-- Roy L
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