The Economics Thread (page 5)

botchtowersociety

Trees grow slower than corn I guess. It's much harder to harvest trees on your property than corn.

It seems to me then, that we are dealing with a difference of degree, and not of kind.

Lore

It goes "round and round" until the profit comes to someone who turns it into something unprofitable, or merely squanders it, and then it's lost forever correct?

Well in the example you gave. SOMEONE is 'loosing' $50 and someone else is gaining $50

The $50 isn't gone, it just exists in another form.

In your example, Jim looses $50, but Frank gains $50. The only way the $50 is really 'lost forever' is if Jim were to burn the lumber and make it unrecoverable.

In this case Jim looses $150, but Frank still gained $50 so $100 is lost forever.

That is an unsustainable system, but only if no more goods are created. Trees continue to grow, so even if someone wastes the lumber by destroying it, more is being generated so it's ok.

sabastious

All trades take place due to a difference of opinion. At an agreed upon price, a seller sells because he judges what he is selling to be worth less to him than what he gets in return. A buyer buys because he judges what he is buying to be worth more to him than what he gives up for it.

The "honor system" has flaws when people cheat.

-Sab

sabastious

Well in the example you gave. SOMEONE is 'loosing' $50 and someone else is gaining $50

So we all have to hope that Frank doesn't make the money disappear?

-Sab

botchtowersociety

The "honor system" has flaws when people cheat.

Very true, that is why we have laws and ways to enforce them.

sabastious

It seems to me then, that we are dealing with a difference of degree, and not of kind.

Well the scanario can be adapted to corn:

Jim has a job stacking boxes for a courier company. Frank has his own business selling corn. Jim has a party and he wants to serve corn to his guests. Jim goes to Frank's business and purchases some corn. The corn Jim purchases costed Frank $25.00 to cultivate, grow and package and he sells it to Jim for $33.00. Frank makes a $8.00 profit and Jim gets corn for his party.
Jim's party does not increase the value of anything. Jim has just lost $8.00 has he not (since he could have grown the corn himself)? He has $25.00 worth of corn and spent $33.00 for it.

-Sab

sabastious

Very true, that is why we have laws and ways to enforce them.

So it is a truth that government plays an integral role in stable econmics? Is this the best approach?

-Sab

james_woods

It goes "round and round" until the profit comes to someone who turns it into something unprofitable, or merely squanders it, and then it's lost forever correct?

The money and the goods of trade are still there. The only one losing anything is whoever "turns it into something unprofitable". Someone else will profit from that persons misfortune.

sabastious

The money and the goods of trade are still there. The only one losing anything is whoever "turns it into something unprofitable". Someone else will profit from that persons misfortune.

Interesting. I forget about the people that gain from others unprofitable decisions.

-Sab

botchtowersociety

So we all have to hope that Frank doesn't make the money disappear?

Unless he burns it or loses it, how did the money disappear? If there are $1 million circulating in the entire economy and no one decides to burn what they have, it doesn't get lost. It just changes hands.

The money is just an accounting unit and a means of exchange, if it is good money, it retains its purchasing value. It has no value in and of itself other than being a unit of accounting for value and exchange. Its only value is that you can use it to get something that is valuable, and that is only because people trust it as a reliable means of accounting that they can use in the same way. The real value is not in the money, it is in the things that money is used as a medium of exchange for.

The Economics Thread

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