When I was very young I had a roommate who very patiently explained to me why there was no food shortage during the siege of Leningrad. It took awhile until I realized what he meant--the market for food probably cleared, as black markets tend to do. Maybe a million people starved, but the market worked fine. This convinced me that economists wear an elegant set of beer goggles. (And then I met a lawyer …)
"As one technology takes over from another (Stafford gets up to diagram) again payoff time, what happens is that a new technology comes along and you investigate and it doesn't pay off for some time. Not much anyway. It's flat. Then it begins to grow like the clappers and then it fades away. Why does it fade away, because a new technology is overtaking it and that is going to be more expensive and it's going to start like this and then it's going to do that. There is the interesting question. If you are soaked in technology A as IPC was in paper and ink in the mode of publishing, and you can see electronics coming along behind which is the blue line, at what point do you level off your investment in paper and ink and research associated with it, and start investing in the electronic version? Where they cross? Well yes you don't know where that is, this is notional you see. You certainly don't know whether you've crossed the second time, which is the crucial one. So you have to guess. You'll make studies of course, but you are going to be wrong, and that is very interesting. About this time I invented Beer's law of economics which said the cross over point happens two years after I retire as a Director of this Company. You think that one out. It's my perfect excuse for not doing anything. No it's all right, I am a director, I don't want the Company to go bust in some crazy new scheme just give me my pension and I'll go and this won't happen till afterwards."
And if you thought what economists tell you about maximizing profits is dodgy, wait till you hear what they have to say about maximizing utility as an interpretation of your revealed preferences!
can't remember whether I've ever talked your ear off about my hobby horse - the shared and utterly unjustified assumption of both economists and Parfit-type utilitarians that the expectation they're talking about maximising, satisficing or maxi-minimising even exists
On the face of it, a theory as mentioned in Footnote 1 faces a reality which includes enterprises run by obsessed founders and those steered by employees of uninterested co-owners.
That kind of thing would be addressed piecemeal by some worthy but unheard-of toiler in a backwater economics department. The shared headine theory of perfect competition exists in the rarefied realm of representative agents, general equilibrium and universal price-taking, so the notional minimal level of profit would be some simple equivalence. Not sure it's required to be >0 anyway in that case, since for the ideal frictionless perfectly competitive 'firm' I guess there are no sunk investment costs (that would be a barrier to entry/exit) so nothing to profit from. The manager-'proprietor' gets a wage & that's enough. If a baseline level of profit is nonetheless for some reason required, presumably it is equal to some notional opportunity cost (+ epsilon - a regress?). Is that opportunity cost the best rate of return available elsewhere, and is there vicious (or ay least indeterminacy-inducing) circularity there?
Actually, can I scrub the above semi-educated elububrations, and instead just ask for pointers to any canonical attempts to produce such a theory? Or just a hint as to search terms useful for finding them?
When I was very young I had a roommate who very patiently explained to me why there was no food shortage during the siege of Leningrad. It took awhile until I realized what he meant--the market for food probably cleared, as black markets tend to do. Maybe a million people starved, but the market worked fine. This convinced me that economists wear an elegant set of beer goggles. (And then I met a lawyer …)
The Long Term is always the Day After I Die
as Stafford Beer said:
"As one technology takes over from another (Stafford gets up to diagram) again payoff time, what happens is that a new technology comes along and you investigate and it doesn't pay off for some time. Not much anyway. It's flat. Then it begins to grow like the clappers and then it fades away. Why does it fade away, because a new technology is overtaking it and that is going to be more expensive and it's going to start like this and then it's going to do that. There is the interesting question. If you are soaked in technology A as IPC was in paper and ink in the mode of publishing, and you can see electronics coming along behind which is the blue line, at what point do you level off your investment in paper and ink and research associated with it, and start investing in the electronic version? Where they cross? Well yes you don't know where that is, this is notional you see. You certainly don't know whether you've crossed the second time, which is the crucial one. So you have to guess. You'll make studies of course, but you are going to be wrong, and that is very interesting. About this time I invented Beer's law of economics which said the cross over point happens two years after I retire as a Director of this Company. You think that one out. It's my perfect excuse for not doing anything. No it's all right, I am a director, I don't want the Company to go bust in some crazy new scheme just give me my pension and I'll go and this won't happen till afterwards."
And if you thought what economists tell you about maximizing profits is dodgy, wait till you hear what they have to say about maximizing utility as an interpretation of your revealed preferences!
can't remember whether I've ever talked your ear off about my hobby horse - the shared and utterly unjustified assumption of both economists and Parfit-type utilitarians that the expectation they're talking about maximising, satisficing or maxi-minimising even exists
On the face of it, a theory as mentioned in Footnote 1 faces a reality which includes enterprises run by obsessed founders and those steered by employees of uninterested co-owners.
That kind of thing would be addressed piecemeal by some worthy but unheard-of toiler in a backwater economics department. The shared headine theory of perfect competition exists in the rarefied realm of representative agents, general equilibrium and universal price-taking, so the notional minimal level of profit would be some simple equivalence. Not sure it's required to be >0 anyway in that case, since for the ideal frictionless perfectly competitive 'firm' I guess there are no sunk investment costs (that would be a barrier to entry/exit) so nothing to profit from. The manager-'proprietor' gets a wage & that's enough. If a baseline level of profit is nonetheless for some reason required, presumably it is equal to some notional opportunity cost (+ epsilon - a regress?). Is that opportunity cost the best rate of return available elsewhere, and is there vicious (or ay least indeterminacy-inducing) circularity there?
Actually, can I scrub the above semi-educated elububrations, and instead just ask for pointers to any canonical attempts to produce such a theory? Or just a hint as to search terms useful for finding them?