[chailatte]

Your reply was regarding efficiency. My reply has to do with free. Let me put it in an example. Electric cars are more efficient than gas vehicles. So consumers switch to electric cars. Those workers whose jobs were rendered useless transitioned into higher knowledge jobs in the electric cars industry. There might be more jobs in the new industry. And customers will likely pay the same amount for the new electric cars (IMPORTANT: demand, the willingness to pay for said utility, still exists). So net loss is neglible. As for the oil/gas industry, the consumer pays for less oil/gas for their cars, so the oil/gas industry switches market to focus on other utilities for their oil/gas.

On the other hand, if the electric cars were free !? People would not have to buy cars ever anymore. Therefore an existing market was destroyed.

But I don't have to explain this to you, you spent lots of money on your economic classes!

[robertpateii]

In theory, all those jobless people would now also not need to buy cars and could spend the savings on learning a how to do the new jobs created by all that extra money that's being spent on stuff besides cars.

In reality, changing careers is hard. Fortunately the government supports this some with low-interest loans, unemployment benefits, etc. Yet evidently it's not enough.

[rubiety]

I'm not even sure where to begin on your confusion here.

1. Firstly, efficiency concerns the ability to more with less. Zero is less, and there's no reason why zero is substantively different than paying $0.01 per car - it's on a continuity that affords the same analysis. So saying you reply "has to do with free" speaks absolutely nothing about my initial arguments focused on efficiency.

2. Money is a veil. Like the discredited mercantilist beliefs century ago, you're confusing output with money. What matters for prosperity is the quantity of goods and services being produced in an economy. You may not realize it, but your argument is essentially granting authority of money over output in estimating prosperity. Output - the actual goods and services produced in an economy - is what matters (and the consumption we enjoy therefrom), not whatever dollar value we assign to them. This by the way is an extremely common confusion among non-economists, so don't feel bad about misunderstanding it.

3. Since you seem so fixated on this concept of "free" sidestepping my arguments, let me take your analogy and present another similar one. Imagine that it's the year 1910 and the price for buggy whips is $25, with a thriving industry producing them. It's already clear that I'm claiming efficiency improvements resulting in a price reduction is a good thing. Now let's introduce your concern: buggy whips are free! "Therefore an existing market was destroyed." Yes, this market would be destroyed. And in fact it was - buggy whips were free in the sense that cars displacing buggies simply did not require them. There is no economic difference here. Yet no one with the knowledge of hindsight today wouldn't even think about arguing that the production of value which is essentially "free" in that case is something "bad", and it's not clear whatsoever that there is some net decline in jobs (in fact all evidence points to this being precisely the opposite - touched upon by your point "There might be more jobs in the new industry").

4. Speaking of net decline in jobs, I'm disputing this being necessarily a problem at all. To say otherwise is to ignore trade-offs and categorically value one thing over another as a society. Jobs are another thing people routinely confuse with prosperity, and they also tend to believe that they are somehow assets instead of transactions. It's like saying "buying a car" is an asset, instead of the car itself. With labor, the software we produce is the asset, not our job that allows such production to take place via a quid-pro-quo. If I could purchase everything I wanted to live by for $1, I'd only work one hour the entire year doing some freelance, and not have a job. Is "not having a job" bad in that sense? Not really - but the point is it depends on the amount of consumption I'm able to enjoy, and the job is just a transaction that effectively grants me consumption purchasing power. It's the seen vs. the unseen that makes thinking about these issues (and really most things in economics) very difficult.

5. You made an important point about willingness to pay, but drew the wrong lesson from it. You seem to think that having a high willingness to pay and a low price ($0 in your example) is a bad thing, but this is precisely the opposite of the truth. In fact this is the very definition of "Consumer Surplus", the net increase of which is a good thing. See my point (1) concerning actual output/consumption being what matters.

6. Really this all boils down to your closing argument, "Therefore an existing market was destroyed", and focusing on some costs and benefits while completely ignoring others. Whether or not destruction of any particular industry is good or bad is not relevant unless you fully account for all costs/benefits. Actual accounting for this empirically is difficult, but axiomatic economics shows that advances in efficiency and producing more with less is precisely the way growth occurs - a net benefit.

To fully explore all the issues here would require much longer. Hence is the simple fact that making nonsense claims takes one paragraph and carefully explaining the often non-intuitive economists implicit in such claims takes 10x as long. Sounds like some debate asymmetry if there ever was any.

[CJefferson]

2. If money doesn't matter, can I have all of yours, because I've found I don't have enough recently.

3. No, buggy whips were never free. People stopped wanting them. The problem now is that the things in highest demand, and which people want more of, and the same things which are free.

[rubiety]

2. I claimed "money is a veil", not "money doesn't matter". People focus too much on money when discussing macroeconomics and the effects of complex changes in the economy, and not on the true measure of prosperity. As a simple example, if the Fed started printing even more obscene amounts of money than it does not, our GDP next might be twice what it is in 2011. Wow, 100% growth! What an easy way to prosperity!

3. In the economic analysis I made, I've pointed out that the effects that he is so worried about are identical, in much the same way that the effect of increasing trade patterns and specialization is very similar to the effect of increasing technological efficiency. Sure people stopped wanting them instead of them literally being free, but that doesn't change the analysis regarding the effects.

[chailatte]

1.) No, you're confused on the very basic demand/supply. Efficiency = provides cheaper supply for a demand. Essentially shifting the supply line down. Free = wiping out demand altogether (market no longer needed). Two different thing.

2.) No. No. No. Money is a store of value. Only governments and economist believes otherwise (and prints money and reduces the value of them. That's why people buy gold/silver). "What matters for prosperity is the quantity of goods and services being produced in an economy" You're kidding me. So empty cities in Spain and China is prosperous? Walmart full of Chinese items is prosperous? Then why are we not prosperous now, instead of 44M Americans on food stamps.

3.) Buggy whip is not a substantial market. Therefore nobody cared about it. If a major market like software/music/movie/tv/website, worth hundreds of billions, is threatened by free, people care.

4.) Until we have a perfect world where everything is free, then we can talk about it. Otherwise we still need jobs for money to fight for food/clean energy/materials/infrastructure.

5.) free is $0. Company receives $0. Has to shut down. Lay off everyone.

6.) if we keep losing jobs to free, the net effect is negative. Not hard to figure it out.

[rubiety]

1. "provides cheaper supply for a demand" - Nice ;-). I'm not disagreeing with you that if it's free there is no market. But that's an entirely different question from asking whether or not the value of goods and services produced is a net increase or decrease, and this is the relevant question. You're also treading very close to confusing "supply" with "quantity supplied", which is ironic as you simultaneously accuse me of misunderstanding supply and demand: http://econperspectives.blogspot.com/2008/05/supply-vs-quant...

2. Huh? Of course money is a store of value, and it's a medium of exchange. And I'm totally with you on skepticism of the Fed/printing money. All of that is completely tangential to my original argument. Your comments on Spain and China could deserve another ten paragraphs of explanation concerning comparative advantage and the benefits of unilateral free trade. It would not be a worthwhile debate.

3. The size of the market doesn't have anything to do with the economics I'm explaining to you. This is another common fallacy where people confuse magnitudes of the parameters in reasoning with the reasoning itself. We're talking at the margin.

4. Once again, a total evasion of any substance. Not even worth it.

5. Sure. Clearly the there is not a net benefit to that particular company and its employees. And? Does analysis of net economic costs and benefits befall one particular company or the economy as a whole? You haven't thought past stage 1, nor does what you said address my (5) whatsoever.

6. Still no argument here, as you completely evade accounting for all costs and benefits over the costs and benefits which are either 1) very visible to you and everyone else, or 2) extreme for one particular group of (special interest) people.

You might enjoy this article: http://www.econlib.org/library/Bastiat/basEss1.html

"There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen."