[anon373839]

To put it more precisely, price controls create market distortions and Pareto inefficiency. Though I think they are worth the cost in some instances, they aren’t a scalable solution to anything. Also, it’s almost impossible to know what the “correct” price of a good should be because the factors that determine that are part of a very complex network.

[_pi]

In context you've unlocked the tautology that underpins capitalism.

> Pareto inefficiency

> almost impossible to know what the “correct” price

Yes it's really really hard to price things, but the market itself is Pareto inefficient unless you labor under the axiom that the market price is the "correct" price, which it cannot actually be.

> market distortions

Why is this a bad thing?

> they aren’t a scalable solution to anything

Do you believe in UBI or that UBI is scalable? That's a price control. Again every public transportation system in the world is price controlled, market distorted, and Pareto inefficient. So they are a scalable solution to providing a public service of regional/urban travel.

> Also, it’s almost impossible to know what the “correct” price of a good should be because the factors that determine that are part of a very complex network.

Most companies that are not trying to grow and are trying to turn a profit literally have prices that not only take into account the cost of the good but marginal profit on a unit basis. This chain goes all the way back to digging out the raw materials from the earth.

Your entire "complex" network of calculations is done there. Why can it not be done elsewhere?

[anon373839]

I think we might be talking about different things, because some of the issues you've mentioned are not examples of price controls or direct market intervention. UBI, for example, is a post-market transfer payment that is certainly a "cleaner" way to redistribute wealth than to futz with individual price signals. (I don't actually support UBI, but not for reasons relevant to this discussion.)

> the market itself is Pareto inefficient unless you labor under the axiom that the market price is the "correct" price

This mischaracterizes my original argument. I don't think anyone who is serious believes that real-world markets establish optimal prices. Perfection isn't relevant: the question is whether markets perform better than government planning, and fortunately we don't have to speculate on that question. Resoundingly, the historical record shows that central planning reduces the total amount of wealth available to be distributed.

> Why [are market distortions] a bad thing?

An example might be useful. Consider when California capped retail electricity prices in 2000. Even though this was far from a competitive market to begin with, the result was predictable: shortages. The price caps reduced utilities' incentive to expand production, and simultaneously increased consumers' incentive to use electricity. (There were other factors involved in this debacle, but the price caps were a key feature.)

> This chain goes all the way back to digging out the raw materials from the earth. Your entire "complex" network of calculations is done there. Why can it not be done elsewhere?

I think you have to broaden your field of view on this a bit to appreciate the problem. You're only considering the perspective of a single supplier in a single market, in isolation. In reality, there is a complex equilibrium that results not only from the forces acting inside a market, but also from the forces exerted by other markets.

Suppose you're a pencil manufacturer. Of course you can calculate some output price for your pencils that reflects costs + some profit margin. However, we don't know if that output price will incentivize good pencil-purchasing behavior. Perhaps you're the only seller of pencils worldwide, and the price is too low. In this case, people who don't really value pencils buy them anyway, and your inventory is depleted. Now, pencils are sitting unused in random drawers, while there are art classes that have to be canceled because the students can't get the supplies they need. (You've mentioned a need to control distribution, but haven't suggested a way for these distributive decisions to be made.)

Consider also that graphite is an input price. How much should that cost? It's useful for making pencils, but it's also used in nuclear reactors and lithium-ion batteries. If the Department of Homeland Prices is going to choose a good price for graphite, they're going to need to decide how many pencils the world needs, how many nuclear reactors, and how many lithium-ion batteries. Of course, those items feed into other items...

[_pi]

Any payment transfer is a complex price control on money. UBI literally means for an individual, for a certain period of time, the first $X of spend cost nothing. That's a complex price floor for a complex commodity (money itself).

> markets perform better than government planning, and fortunately we don't have to speculate on that question. Resoundingly, the historical record shows that central planning reduces the total amount of wealth available to be distributed.

Nobody actually makes this argument with any seriousness anymore in real academic economics. Modern economics is data driven, and the reality is that in order to make this argument like economists in the past have made you need to cherry pick not only your data, but cherry pick your goals. What does it mean to "perform better" why does it matter that the "total available wealth" is lower? You're attempting to use market logic to prove markets, market logic smooths everything into $ and by applying market logic to non-markets you can easily prove it's better by market logic. It's like saying races are the best way to judge vehicle performance.

Not only that but htis is a sociological arugment. Not an economic one. That's why Karl Marx is the father of sociology and not Carl Menger.

> An example might be useful. Consider when California capped retail electricity prices in 2000. Even though this was far from a competitive market to begin with, the result was predictable: shortages. The price caps reduced utilities' incentive to expand production, and simultaneously increased consumers' incentive to use electricity. (There were other factors involved in this debacle, but the price caps were a key feature.)

You didn't actually answer the question. Shortages and market distortions are not the same thing. A shortage is a shortage. A market distortion is in the optimal abstract the inability of our system of value to accommodate for value that isn't speculative. In hindsight a market distortion is the "incorrect" pricing of goods. However practically, all markets are distorted as you concede in your second paragraph that it isn't about finding the optimal price.

You're simply saying market distortions are bad because some market distortions are also shortages. Rectangles are bad because some rectangles are also squares.

> Suppose you're a pencil manufacturer. Of course you can calculate some output price for your pencils that reflects costs + some profit margin. However, we don't know if that output price will incentivize good pencil-purchasing behavior. Perhaps you're the only seller of pencils worldwide, and the price is too low. In this case, people who don't really value pencils buy them anyway, and your inventory is depleted. Now, pencils are sitting unused in random drawers, while there are art classes that have to be canceled because the students can't get the supplies they need. (You've mentioned a need to control distribution, but haven't suggested a way for these distributive decisions to be made.)

I could have stopped reading this paragraph at "we don't know if that output price will incentivize good pencil-purchasing behavior". The only need for pencil purchasing behavior in the case we are talking about the price controls case, is when profit is part of the mix. I've already conceded that price controls and profit are volatile. Price controls are about providing a service, in fact known commodities don't "really" have the issue of nobody wants to buy them. People need pencils. You're talking a lot here about how hard it is to get people to buy pencils AND make an optimal amount selling those pencils. That's simply not the case we are discussing with price controls.

> (You've mentioned a need to control distribution, but haven't suggested a way for these distributive decisions to be made.)

A lot of these are easy for base commodity goods. And as a society we know how much the average person uses pencils / tooth brushes / etc. That's actually what markets are good at, experimenting and collecting data. You can survey people. You can collect information about shortages in real time. This is an inventory problem, these are simple computer models that can solve this.

>Consider also that graphite is an input price. How much should that cost? It's useful for making pencils, but it's also used in nuclear reactors and lithium-ion batteries. If the Department of Homeland Prices is going to choose a good price for graphite, they're going to need to decide how many pencils the world needs, how many nuclear reactors, and how many lithium-ion batteries. Of course, those items feed into other items...

The government in various layers already chooses how much consumption happens. You've hit on one here which you've ironically not commented on. Governments all around the world essentially some to a lesser degree and some to a command economy degree control the distribution and allocation of power plants.

Yeah let's talk about the price of graphite though. The current price of graphite is a speculative price based on what the average buyer is willing to pay for it. Does that price accurately reflect the cost of extracting that graphite? At what scale of extraction does that price reflect the extraction of graphite? How much capital expenses are needed to extract graphite? What happens when the cost of graphite is less than the actual cost of extracting it, but demand does not change? What if the price equilibrium of graphite and all of it's dependent commodities or some other commodity is predicated on slave labor?

In this entire chain someone is getting fucked breathing in graphite fumes and getting compensated pennies for the actual value of their work. This is entirely the problem with how markets are applied, it's making software for software's sake, not making software for people. This is just spinning cubes untethered to the real needs of humans, making numbers go up. You're just playing EVE online IRL.

Seriously EVE Online shows you how you can easily solve this problem. All the data is there and it's actually "open". Even better that EVE ISK doesn't need to feed anyone. You can compute the costs of entire supply chain of EVE very simply. Literally https://evetycoon.com/ solves the very problem (pricing out the whole chain accurately) you're trying to say is a huge unsolvable problem by a singular entity. All you need is the data and the rest of the software is just basic calculations of supply costs and a constraint solver that includes every commodity weighted by demand.

This mystification of capitalism as being a complex beast was simply the woo of a bunch of 20th century men (and a minority of 19th century men -- e.g. Austrian school founders) who were too lazy, too dumb, or didn't have enough tools to cope with the explosion of commodities and production of the second industrial revolution (first industrial revolution for the 19th century guys, and also they were dumb and/or lazy not giving them the tooling doubt -- e.g. Menger and the gang).

This entire line of thinking has been swiftly discredited within the last 30 years in the mainstream because it is not just ideological, it's just plain wrong. It is also a fun house mirror of those it credits to make the claims. The "Invisible Hand" of Adam Smith was a pejorative for a market that dominates the lives of people living under it, not a fantastical near utopia where men are entitled to the sweat of their brow.