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BWE Posts: 1902 Joined: Jan. 2006 (Permalink) Posted: Jan. 10 2006,14:32    And that is why we don't need a degree in economics to make judgements in economic arenas, because economic choices are largely moral choices and, though you can abstract them into an academic field and paint those moral choices as amoral and descriptive versions of those moral choices, in the end our economic activity boils down to moral choices. Walmart is an absolutely beautiful illustration of that fact for the reasons listed above. -------------- Who said that ev'ry wish would be heard and answered When wished on the morning star Somebody thought of that, and someone believed it Look what it's done so far The Daily Wingnut

Flint Posts: 478 Joined: Jan. 2006 (Permalink) Posted: Jan. 10 2006,16:36    haceaton: Quote It doesn't take a genius to realize that *margin* is not profit. Margin times volume = profit. Walmart, like all good profit making enterprises seeks to maximize total profit. They do this by trying to find the peak in the total profit curve. Sigh. Yes, I understand. Quote Evidently, they believe this peak lies at lower prices than they have yet been able to achieve. Bully for them, they may well be right. So the question is, could WalMart increase total profits by raising their prices? After all, most of what they sell is commodity items, and commodity items tend to sell on price alone. Which means you don't need to undercut your competition by more than a little bit to get all the sales. My perception is that WalMart has a more complex goal structure than simply maximizing profits. They're aware that this goal, all by itself, is highly impermanent. If we layer on ancillary goals like maintaining acceptable (but not highest possible) profit levels for as long as possible, strategies change. Quote But at least he wasn't stupid like you and thought the way to achieve massive wealth was by maximizing his profit margin. You seem to be falling into the Sir Toejam mire of assuming anyone with whom you disagree is stupid (or would you allow ignorant in addition?) I thought on one of my posts earlier, I spoke of spending all of economics 101 creating and solving the total profit curve, to find the ideal price such that either lowering OR raising the price reduced total profits. Do you sincerely feel I don't follow this? I think we agree that WalMart's total strategy is intended to both solidify and increase their market position, not to take the money and run. Quote Seriously, if you are wondering why the energy and chemical moguls are lobbying hard for trading pollution credits... Let me guess. It's because they are EVIL BASTARDS out to line their pockets by abusing their power at the expense of us poor schmucks who couldn't vote in an honest Congress because the Big Guys have all the politicians in their pockets, and are manipulating government regulation so that it protects them and their profits at our expense. Am I getting warm? Quote Really Flint, for a guy that argues that the rest of us are economic dolts, you're looking pretty pathetic...You have no idea how the game is played. Golly, I hope you feel better now. I understand SO MUCH MORE than I did before your fine little performance. You may pat yourself on the back and go enlighten some other pathetic ignoramus now. I won't mind. If you want to play some more after you grow up, that's fine too. You clearly have nothing to learn from anyone. BWE: Quote And that is why we don't need a degree in economics to make judgements in economic arenas But nobody said we did. What you would learn in economics is how to do things like set product price and quality so as to maximize profits. And to analyze costs and benefits so that you are not taken by surprise. Quote in the end our economic activity boils down to moral choices. Yes, but the moral choices made by a very large number of actors can be generalized enough to make fairly accurate predictions in some areas. We are still not communicating. Consider: The odds of rolling snakeyes can be calculated, regardless of whether gambling is considered moral. There is a qualitative difference between the optimal strategy for playing the game, and whether the game itself *ought* to be played. You seem to be trying to make the case that the best way to understand economics is to attend church so as to avoid sinful differential calculus. Quote Walmart is an absolutely beautiful illustration of that fact for the reasons listed above. But again, we are talking about different things. Even assuming that WalMart follows haceaton's implicit dictum that the more cynical he is, the more accurate he is likely to be about how the world works, and that assuming "the enemy" (everyone else) is as dishonest as they can get away with, supply and demand still operate. Haceaton apparently believes that Adam Smith missed the boat entirely, and that Al Capone was the real economist. But that doesn't make it true at all. Economics is a world of costs and benefits, where more of something means less of something else. An economy is where zillions of individual transactions determine relative values of everything. WHY those transactions are made really don't matter that much. If you wish to believe that people buy brand X canned peas for moral reasons, fine. Economists will note with amusement that the most moral peas ALSO tend to have the lowest price, all else being equal. As these discussions continue, it becomes clear that WalMart, probably by their very success, has triggered deep-seated political instincts. You and haceaton seem so fanatically convinced that WalMart is evil that any effort to understand their business model that does NOT continuously rave and drool against the Unclean is regarded as either hopelessly uninformed (by haceaton), or outright immoral( by you). But WalMart is nonetheless an economic actor, and their policies do in fact have economic effects beneficial to some and harmful to others. I think it's kind of sad that fanatacism has made this simple observation so difficult for you two to understand or accept. To you, all I can say is bless you, brother. May you live in righteousness. To haceaton, I can say I'm glad I don't live in the world of his imagination, where he tries to puff up his withered soul by living among terrible enemies of whom he assumes the worst.

haceaton Posts: 14 Joined: Dec. 2005 (Permalink) Posted: Jan. 10 2006,18:33    Quote Do you sincerely feel I don't follow this? Certainly you must have in EC101. Why you dropped the ball in order to criticize my position that the Walmart owners are out to maximize their wealth, I don't know, so I appologize for calling you stupid. But the argument you made relied on this error so you should either make a good argument or concede that Walmart is run to make the most money. Quote So the question is, could WalMart increase total profits by raising their prices? Maybe, but I would say that they (Walmart management) doesn't think so. Since you disagree, what do you think is their motivation for low prices that makes them break the law, act unethically, etc.? I would argue that the evidence points to a desire to make money; Sam Walton amassed an enormous fortune and this did not happen by accident or dumb luck, it was a systematic effort on his part; and he's surely taken better advantage of "the system" than Al Capone ever did or could. I'm not fixated on Walmart, it was an example that you and others were using and I felt you were mis-characterizing. So I added my two cents. The same arguments can be made for many large corporations. As for evil, no I don't think Walmart or the people that run it are evil. Greedy, yes. Unethical, yes. But this sort of greed and ethical lapses is very common in the business world - it is far from unique to Walmart. As you point out Walmart is vilified because of its success, not because it is peculiarly unethical. Heck, it probably even started out as a totally ethical, honest enterprise. I would describe the pathology more like a drug addiction than "evil". Because the punishments are usually light to none and there is still the thrill of more money especially when you have too much, so the corporate tycoons really can't help themselves. I'd like to think I wouldn't do the same in their shoes, but it's easy to see how it happens. Certainly there are many good, honest and ethical politicians. It's just that there are a lot more who aren't. The same with corporate executives. So we end up with laws that strongly favor the wealthy. I have no illusions that it will ever be any different, but I make it a point to try to "do the right thing" in politics anyway. I do believe we have a seriously broken system where corporations have the rights of citizens (free speech, etc.) without the responsibility (no such thing as corporate three strikes you're out or corporate life-imprisonment). It is what leads to the light punishments, resulting temptations and wealth addicted corporate chieftans. Let me say two things before I go on: (1) I respect most of what you've said in on-topic (i.e. TOE) posts on PT and (2) I agree completely with: Quote Some days, I feel truly sorry for our grandchildren. It surprised me that you said this because nearly all of economic theory seems to be based on the idea that unbounded growth is a necessity. Quote the Big Guys have all the politicians in their pockets, and are manipulating government regulation so that it protects them and their profits at our expense. Hey that's pretty close! They may not have the politicians in their pocket, but they would like to. That is why they spend their hard earned money lobbying: to buy influence. [ What do you think paid lobbying is for?] Why do they want rules for pollution credit trading? Indeed it is to protect their profits. If they absolutely can't pollute then their costs will rise, their margins will shrink, and their market will shrink too. They won't make as much money so it is "not in their interest" to not pollute. The environmentalists don't want any pollution, and they have bought some influence too. So it's much "better" for the corporate mogul who wants to protect his profits to have predictable costs in the form of pollution credit trading than to run the risk of real severe and unpredicatable penalties in criminal or tort claims. The good news is that there are some ethical people running some corporations (Toyota comes to mind) that instead want to invest in finding ways to reduce pollution even though it reduces their profits. But you can identify those companies that want to pollute instead by how they lobby the congress.

Flint Posts: 478 Joined: Jan. 2006 (Permalink) Posted: Jan. 11 2006,03:44    haceaton: Quote Certainly you must have in EC101. Why you dropped the ball in order to criticize my position that the Walmart owners are out to maximize their wealth, I don't know, so I appologize for calling you stupid. But the argument you made relied on this error so you should either make a good argument or concede that Walmart is run to make the most money. Multiple comments seem called for here. First, it can reasonably be said that ALL for-profit businesses are out to maximize their wealth as a primary goal. I don't know why you would consider this a bad thing per se. According to even the most basic notions of the market, for-profit businesses are presumed to be attempting to increase their wealth. As Robert Townsend wrote in Up The Organization, if you're not in business for fun or profit, what are you doing here? Second, I can't see why you refuse to accept that businesses (including WalMart) can have no other motivations. As you point out, they pay fairly low dividends, although they could pay much more. So the owners aren't taking advantage of dividends to maximize their wealth. How about the price of the stock? Well, no, WalMart stock is selling for 10% less than it did 5 years ago. They are *losing* money on the stock price. Now, I suppose you might argue that WalMart's owners are stupid. They could easily extract a great deal more personal wealth out of their company, at least in the short run. Yet they do not. Perhaps their goal is to maximize their wealth over a much longer timespan? But doing this will entail reaching some kind of equilibrium with the communities where they operate... (Incidentally, I've seen economic analyses indicating that WalMart's low-price policies have had a measurable effect on national inflation rates. A positive thing for most of us, even if it is ALSO positive for the major shareholders.) Quote Maybe, but I would say that they (Walmart management) doesn't think so. Since you disagree, what do you think is their motivation for low prices that makes them break the law, act unethically, etc.? With a business as large as WalMart, I'd take this on a case-by-case basis. My reading (YMMV certainly) is that most of the cases aren't WalMart corporate policy, and most have been zealousness on the part of individual store managers. But it also seems that corporate headquarters hasn't been aggressive in stopping some of the improper practices. And so I have been arguing from the start that regulation is a necessity. Certainly the motivation to make money is uppermost, and store managers are evaluated on that basis. In a larger sense, business success is evaluated on that basis, and the failures go broke and vanish. The motivation to bend or break rules and cut corners is strong. (Would you fall over backwards in astonishment if news were to come out that Toyota has been cooking the books?) Quote As for evil, no I don't think Walmart or the people that run it are evil. Greedy, yes. Unethical, yes. But this sort of greed and ethical lapses is very common in the business world - it is far from unique to Walmart. I regard it as inherent in any capitalist system, considered generally as any system where the more money one makes, the more one gets to keep. These aren't "lapses" so much as they are a continuous battle between those who make and enforce the rules, and those who seek ways to circumvent the rules. A story is told of a robber baron who called in his lawyer and said "Find me a legal way to do this." And the lawyer replied "But sir, you can't do that, it's illegal." And the robber baron replied, "That's not what I asked." Quote As you point out Walmart is vilified because of its success, not because it is peculiarly unethical. Heck, it probably even started out as a totally ethical, honest enterprise. Perhaps where we differ here is, I regard it as being as honest and ethical as (say) General Motors, or Sears or any other large business. And a LOT better than the Enrons of the world. I sincerely believe WalMart (and others) top management wishes to make a good-faith effort to keep integrity levels at or just above minimally acceptable. I don't think Sears achieved market dominance through underhanded management, nor lost it by becoming honest. If you revisit your list of "how the real world works", you'll notice that nowhere do you even mention customers or competitors. Quote I make it a point to try to "do the right thing" in politics anyway. I do believe we have a seriously broken system... Well, I'm not trying to dispute your political preferences. I just don't believe there ever has been a "golden age" when politicians or businesses were more honest, and in fact my reading of American history is that there have been periods of truly boggling corruption. If you'd been alive 100 years ago and known what was going on, you'd have had apoplexy. Of course, the tycoons ran the media, so you wouldn't have known. Quote I respect most of what you've said in on-topic (i.e. TOE) posts on PT Do you post on PT also? Quote It surprised me that you said this because nearly all of economic theory seems to be based on the idea that unbounded growth is a necessity. We seem to approach this from different angles. Economic theory as I understand it provides tools for analysis of a shrinking, steady, or growing market. Growth isn't a necessity, but it has implications different from the other conditions. I'll observe that fertility is inversely proportional to living standard; if ALL nations could consume at the rate the US is consuming, perhaps the birth rate would go down more voluntarily? Quote Hey that's pretty close! Imagine my surprise. Quote Why do they want rules for pollution credit trading? Indeed it is to protect their profits. If they absolutely can't pollute then their costs will rise, their margins will shrink, and their market will shrink too. Um. No such thing as "absolutely can't pollute". There are only relative costs. Politicians aren't about to shut down the major employer in a community. The problem is wider: If running a non-polluting operation is prohibitively expensive (which it is for some sorts of manufacturing), then the level of polluting one can get away with influences the price of the product, which influences market share. Often, the competition is in China, where pollution levels are ghastly, and the Yellow River runs with sludge the half the year when it runs at all. Combine this with Chinese peasants working for peanuts, and its very hard for American businesses to compete. Competitive failure costs lots of American jobs and industries, and politicians are sensitive to this. Some balance needs to be struck between allowing pollution, and losing the businesses (which causes the people to elect the opponent!. Quote The good news is that there are some ethical people running some corporations (Toyota comes to mind) that instead want to invest in finding ways to reduce pollution even though it reduces their profits. But other tradeoffs must always be made. Perhaps I'm misunderstanding you, but you seem to be implying that the decision to pollute/break laws/act unethically implies a character trait without economic ramifications. But I doubt people buy Toyotas because corporate headquarters is populated by good citizens. Instead, they buy Toyotas because they are competitively priced in relation to their level of quality. Now, I agree that the example set by Toyota and others shows that it CAN be done. But of course, Toyota is out to maximize their profits as well, and Toyota lobbies powerfully at local, state and national levels. And Toyota employees are paid less in both upfront wages and indirect benefits than GM employees. And Toyota's primary owners are very rich. And Toyota aggressively seeks favorable tax treatment. In my district, a new Toyota plant just opened that was enticed to locate here in exchange for *bonuses instead of taxes*. (Incidentally, diluting stock as you described is a very serious SEC no-no. Recently the accounting rules were changed (admittedly over stuck-pig protests) to consider options differently, as actual stock. Keeping two sets of books, one for the SEC and one for the public, lands you in jail very #### quickly. Many other items on your list are "heads I win, tails you lose" things - if they pay high dividends, they are ripping us off. If they don't pay any dividends, they're ripping us off. If they pay enormous salaries to their top brass, they're ripping us off. If they don't they're ripping us off. As for keeping wages in line with skills, this is problematic. Most WalMart jobs are unskilled or semi-skilled; nearly any retard can do them. This is in the nature of retailing. But WalMart must STILL compete for such people with other employers; they get no "first dibs" on anyone.)

BWE Posts: 1902 Joined: Jan. 2006 (Permalink) Posted: Jan. 11 2006,06:00    Quote [QUOTE]And that is why we don't need a degree in economics to make judgements in economic arenas But nobody said we did. What you would learn in economics is how to do things like set product price and quality so as to maximize profits. And to analyze costs and benefits so that you are not taken by surprise.[/QUOTE] Quote What’s annoying is that in some fields (like economics, politics, psychology, etc.) we have the public perception that “opinions are like assholes” and no amount of education or experience can lead to a better understanding of these topics than can be assimilated in kindergarten. So I’m amused at the irony here. Tara Smith has friends who are intelligent, educated (but not in evolution), and still “know better” than to “believe in evolution.” And here we have a response from someone intelligent, educated (but not in economics) who still “knows better” than to “believe in” trickle-down economics. Without knowing even what it is. Sound familiar? http://www.pandasthumb.org/archive....t-67491 Quote So does this mean economics remains beyond human comprehension? Is this why economists are said to be paid twice, once to tell you what will happen and again to tell you why it didn’t? But nonetheless, you tell me that “a layman can grasp the impact of some basic economic policies.” Too bad economists can’t model it, despite decades of tweaking. Maybe they should go out and poll some laymen? http://www.pandasthumb.org/archive....t-67514 The reason I didn't tell you my particular morality before was that it wasn't important. Yours is equally valid. I thought you were saying that making polital economic decisions requires an academic understanding of economics. I work for that big bad gov't and I can tell you first hand that enough money can get a report that took me two years of research to create buried. Fisheries are an economic area where there is a lot of money to be made. I am an expert in that area and I can tell you we done raped the sea. Most of the fisheries we have left are heading toward the precipice. But have no fear! Farm raised salmon are here! Leaving behind a 12 mile swath of dead seafloor, breeding with native stock and weakening the genetic capacity to withstand certain obsticles to reproduction and many more lovely things that would take too long to explain. But economists are writing reports about how economic theory shows that our research doesn't matter. We are making political decisions at the request of 4 or 5 people with large financial risks at stake. The list goes on and on and on and on but those people are making moral decisions based on their morality. That is why they are buying the politicians. That seems right for them. Unfortunately for me (and this is where I leave my original point) one of them is worth a few million of me because I can't buy influence. I have to organize a group of people and petition and show our elected officials that I can get them elected through my unfunded PR efforts. That is an aside though. Of course there are tradeoffs. Of course economics is legitimate. But you don't need to know a whole lot about economics to make reasonable economic choices. -------------- Who said that ev'ry wish would be heard and answered When wished on the morning star Somebody thought of that, and someone believed it Look what it's done so far The Daily Wingnut

Flint Posts: 478 Joined: Jan. 2006 (Permalink) Posted: Jan. 11 2006,06:20    BWE: Quote I thought you were saying that making polital economic decisions requires an academic understanding of economics. I guess I need to clarify this. You don't need any understanding of economics at all to make economic policy, but you DO need this understanding to predict what your policy might lead to. Politicians know what their constituents want, and they do it. Often enough, they're well aware that the actual results will probably be, and that the results are the opposite of their stated intent. Quote But economists are writing reports about how economic theory shows that our research doesn't matter. We are making political decisions at the request of 4 or 5 people with large financial risks at stake. Yeah, too true. These economists aren't hired to explain what will happen, but rather to produce plausible deniability in support of short-term profits. Yes, large amounts of money are at stake, along with different time frames and commons issues. Quote The list goes on and on and on and on but those people are making moral decisions based on their morality. Maybe this is a semantic issue. I'd say these people are making monetary decisions based on their immediate self-interest. Quote That is why they are buying the politicians. They aren't buying morality or immorality, they are making a transaction they regard as an investment. Contribute $X to a political campaign, get policies worth $50X in exchange. For them, a bargain. Quote But you don't need to know a whole lot about economics to make reasonable economic choices. If by "reasonable economic choices" you mean purchasing decisions, this is true. If you mean setting price and quality of your product, this is not true. If you mean making economic political policy, economics can help you determine financial impact on specified actors.

haceaton Posts: 14 Joined: Dec. 2005 (Permalink) Posted: Jan. 11 2006,07:45    Quote First, it can reasonably be said that ALL for-profit businesses are out to maximize their wealth as a primary goal. I don't know why you would consider this a bad thing per se. I'm going to take this that you have conceded the point that Walmart's strategy is to maximize its wealth and that minimizing prices is a tactic used to achieve it. I never said that maximizing wealth is a bad thing. If you bound the maximum by ethical consideration then there is nothing wrong with it. When ethical considerations are put aside in order to reach an unbounded (by ethics) maximum wealth, then it is a bad thing. Quote Would you fall over backwards in astonishment if news were to come out that Toyota has been cooking the books? No. I didn't use Toyota as a catch-all example of corporate ethics, only as a pollution example. But I can see where what I wrote suggested broader ethics than what I intended. Quote I just don't believe there ever has been a "golden age" when politicians or businesses were more honest Neither do. I never suggested such a thing. Quote I regard it [Walmart] as being as honest and ethical as (say) General Motors, or Sears or any other large business. And a LOT better than the Enrons of the world. I agree with this, but their honesty and ethics level is too low. Quote Do you post on PT also? I have, but not too often. Look for harry eaton rather than haceaton. Quote Incidentally, diluting stock as you described is a very serious SEC no-no. I'm not talking about unregistered securites (a no-no that is also seldom severely punished). I'm talking about having a shareholder vote where they agree to increase the shares outdanding (for example it is often pitched to allow for a stock split). This is perfectly legal and is used to "recharge" the bank of stock held by the company to issue "incentive" options. Ordinary shareholders should seldom agree to this (at least with the typical vague, non-binding reasons given in the proxy card for increasing the outstanding shares) but they routinely do. Quote Recently the accounting rules were changed (admittedly over stuck-pig protests) to consider options differently Sort of. Companies can still elect to use the method of APB 25, the so-called "intrinsic value" method of valuing options  grants which is an absurd fiction. It is interesting that the tycoons are so worried about the effect this accounting change will have on the markets. Personally I think it won't matter much; the well informed could figure it out before and the rubes will continue to be rubes. Quote Keeping two sets of books, one for the SEC and one for the public, lands you in jail... I'm not talking about two separate sets of books, I'm talking about how they are accounting for the IRS vs reporting to shareholders. There is growing creativity by most corporations in this area these days, and most of it is "legitimate" at least until the IRS updates their rules. But no worries, the IRS is always a step behind. Quote if they pay high dividends, they are ripping us off. If they don't pay any dividends, they're ripping us off. Why would you think this? I certainly don't view either strategy as "ripping off" anyone. Personally I don't see why investors would buy the stock of companies that have a firm policy of never paying any dividend. I guess it's for the hope of stock re-purchase plans. [In the short term, it is the hope of rising prices of course, but absent any bonafide connection between the stock and real money it is purely a game of hypotheticals.] I described the motivation of management to not pay dividends not as a rip-off but as a way for the top management to maximize their personal wealth. The rip-off comes in the form of diluting shareholder value through option compensation grants. In principle it should result in reduced stock prices. In practice it hasn't but then maybe it's just a matter time since the expansive use of options grants is a relatively new phenomenon.

Flint Posts: 478 Joined: Jan. 2006 (Permalink) Posted: Jan. 11 2006,08:45    haceaton: Good to get the discussion back where we can actually address these issues. Quote I'm going to take this that you have conceded the point that Walmart's strategy is to maximize its wealth and that minimizing prices is a tactic used to achieve it. OK, fine, so long as we agree that maximizing wealth can be construed in different ways, over different periods of time, and (as you point out) tempered with other goals. Perhaps ultimately ANY economic goal can be considered "wealth" including goodwill, market share, longevity, committed and dedicated employees, etc. Quote If you bound the maximum by ethical consideration then there is nothing wrong with it. When ethical considerations are put aside in order to reach an unbounded (by ethics) maximum wealth, then it is a bad thing. I'm going to continue to insist that "good" and "bad" are personal and entirely relative. What is good for someone is generally bad for someone else. If someone plays by the rules, this is all I think we can reasonably require. Like in sports, there is a difference between being a hard-nosed player (admired), and unsportsmanlike conduct (generally illegal). As I wrote, competitors will (and IMO *should*) seek every possible way to get an edge. If shabby treatment of employees is "bad", presumably some competitor can outcompete them by treating employees better and thus attracting better employees. If community relationships sour, someone more community-oriented can outcompete them. The most effective regulation I know of is regulation that ensures that competition is as transparent as possible. Quote Neither do I (believe there was a golden age). I never suggested such a thing. Then you feel the system has *always* been "seriously broken"? I wonder if you could put your finger on a time and place where "the system" was NOT "broken". Quote I agree with this, but their honesty and ethics level is too low. This statement is meaningless without some scale of ethics against which the measurement is made, along with some more-or-less objective point ON that scale below which is "too low". I personally would hate to have to specify either one. Quote Ordinary shareholders should seldom agree to this (at least with the typical vague, non-binding reasons given in the proxy card for increasing the outstanding shares) but they routinely do. I agree. The notion that executive incentives will inspire the officers to perform better strikes me as absurd. Even where bonuses are tied to performance, there always seem to be ways of finding rewards. And no amount of money will make the executives smarter or better able to predict the future. Quote But no worries, the IRS is always a step behind. Yep, that's right. I wrote earlier of "a continuous battle between those who make and enforce the rules, and those who seek ways to circumvent the rules." But my gut feeling is that this battle is healthy, and that NOT seeking an edge for "ethical reasons" isn't so healthy. The kind of "ethical behavior" I envision (maybe I'm misinterpreting?) is like for a ballplayer to deliberately strike out because his team is well ahead and the opposing pitcher's statistics need a little boost. Maybe to you this is "kindness" but to me it's a disturbing violation of the game itself. Even altruism, IMO, should be practiced in the interests of maximizing self-interest, though perhaps more long-term. "Ethical" considerations, at least in sports, are usually a quid pro quo - I'll tank this match when you desperately need a win and I don't, in the expectation that you'll return the favor later. To me, this isn't a matter of helping out those who need a hand; it's a way to undermine the integrity of the game. I just don't think WalMart should take actions that reduce their immediate total profits, EXCEPT in the hopes that by doing so, they can increase their long-term profits. This is what I meant by an equilibrium with the community. Quote Personally I don't see why investors would buy the stock of companies that have a firm policy of never paying any dividend. I think I can understand the argument that, at least during some interval, it's in their interest in the medium term to shovel profits back into growth. After all, "never" means "not right now." Even Microsoft has started to pay dividends (however minimal). Quote I described the motivation of management to not pay dividends not as a rip-off but as a way for the top management to maximize their personal wealth I'm not sure I follow here. Top management can maximize their personal wealth by being granted a major bundle of stocks and then pay lots of dividends; by being granted a bundle of stock and having the market price rise a bunch, or by paying themselves huge salaries and bonuses. In the context of WalMart, I wasn't seeing the Walton family doing any of the above. But I just left a company that pays minimal wages, loses money every quarter (for years now), and pays the CEO in the millions per year. They also pay no dividends. Quote The rip-off comes in the form of diluting shareholder value through option compensation grants. In principle it should result in reduced stock prices. In practice it hasn't... I think there are different flavors here. I know at the company I just left, there was a program of granting options to those above a certain pay grade. But this didn't increase the number of shares outstanding on the books. Granted, when they wanted more shares they needed a vote, and most shareholders rubber-stamped it.

sir_toejam Posts: 846 Joined: April 2005 (Permalink) Posted: Jan. 11 2006,09:11    I don't want to sidetrack the current state of this discussion.  I've been quite busy the last several days and kinda feel I've fallen too far behind in this discussion to continue. I'll sum up all of my previous comments about Flint's free market arguments by addressing this single comment by Flint: Quote I don't know where we'd draw the line and say "Beyond X amount of regulation, this isn't free market anymore. hmm.  unless i missed the point of the basic definitions I was taught in the economics course i took, ANY amount of regulation makes it no longer a free market by definition.  You now have a regulated market. I think all of our arguments are based on a misconception of what the terms free market and laissez faire actually mean.  Laissez faire, is typically used in cases where it meant "hands off", as in NO regulation, and is commonly used to mean a "true" free market. In support of this definition, I give you wiki: http://en.wikipedia.org/wiki/Laissez-faire After saying you had little or no problem with free market educational systems, you followed that up by noting that appropriate regulation in an economy stems corruption and provides stability. this is exactly what i was trying to get at.  So, aside from the rest of the BS on both sides, it appears we actually agree that free market systems don't actually work. If there is further clarification of your position you wish to make, please do so, but refer back to your earlier statements and clarify those as well then, if you would be so kind. otherwise, I'm just as happy to let those who have started new conversations in this thread to continue on as if i never posted this. cheers

sir_toejam Posts: 846 Joined: April 2005 (Permalink) Posted: Jan. 11 2006,09:26    Quote I think there are different flavors here. I know at the company I just left, there was a program of granting options to those above a certain pay grade. But this didn't increase the number of shares outstanding on the books. Actually, working in Silicon Valley, I found it's pretty common to offer options in publically traded companies in leiu of benefits or pay raises, for all pay grades. but as you point out, options are NOT shares. The excericise of options can be arbitrarily regulated by the company itself, in order to control how those options actually are converted into shares. Yeah, I learned that at my company too.  the hard way. Also, there often are not only written rules as to how options may be excercised, but there are internal "pressures" as well.  Your boss might pull you aside, for example, and warn you that you should wait until X time to excercise your options. If you work for a company that actually offers shares instead of options, you work for a company that likely has a decent income outside of profits from the sale of shares.  that's a good sign. If you start work for a company that immediately offers you options in leiu of an appropriate pay scale, or benefits, I would be highly suspicious and suggest checking out that company's sources of income and expenditures. There were a lot of "junk" tech companies in the 90's that simply ran off income from stock sales, with no actual product line even.   There were even companies, like the one i mentioned I worked for above, that actually shifted their business model in order to take advantage of this. If not sustainable in the long term, it can be quite profitable in the short term. but then, we start talking about issues of morality again.

Flint Posts: 478 Joined: Jan. 2006 (Permalink) Posted: Jan. 11 2006,09:56    Sir Toejam: Quote I think all of our arguments are based on a misconception of what the terms free market and laissez faire actually mean. I suspect you are right. You have assumed a dichotomy: There's free, and there's not free. I have assumed a continuum, with a level of regulation varying from nearly nothing up to a tightly controlled and managed economy. So for me, a "free" market is one toward the less-regulated range of this continuum. My notion of economics is that management is unavoidable. Even the "ideal" laissez faire notion has a form of management; it's just redirected into such things as assassinations, espionage, sabotage, and other mechanisms that work toward a sort of equilibrium. I personally believe that so long as competition is strictly enforced, the competition itself will act as a powerful regulator of market behavior. And one of the best enforcements of competition is a practice of full disclosure of nearly everything any supplier is doing. In fact, without some pretty comprehensive (and timely and accurate) information, competition is inhibited and the market suffers regardless of how stringent the regulation. Quote So, aside from the rest of the BS on both sides, it appears we actually agree that free market systems don't actually work. Again, we have different definitions of "free". I still see this as a matter of degree. I'll admit I'm more a proponent of incentives than micromanagement. I'll wager that if we eliminated all of OSHA in favor of a policy that "each job-related injury will cost you a million bucks, whether it was preventable or not" we'd see a dramatic improvement in safety. Of course, we'd need to set this up so as not to provide an incentive to employees to GET injured... Quote There were a lot of "junk" tech companies in the 90's that simply ran off income from stock sales, with no actual product line even...If not sustainable in the long term, it can be quite profitable in the short term. but then, we start talking about issues of morality again. Maybe we have difficulty with the term "morality" just like we viewed "free" differently. I think it's entirely legitimate to start up a company armed with a really good idea and an effective business plan, and sell ownership in the company to raise capital. I've done this myself. My experience was that those who purchased this ownership exercised it by ensuring that their investment was directed toward implementing the idea, so that future income would come from sales of product within some reasonable time frame. So I presume you're saying that if I had set things up so the investors had no such authority, and then spent their money on high living until I ran out of investors, that would be immoral. And I suppose so; I admit I was never able to find such investors.

sir_toejam Posts: 846 Joined: April 2005 (Permalink) Posted: Jan. 11 2006,12:04    Quote I think it's entirely legitimate to start up a company armed with a really good idea and an effective business plan, and sell ownership in the company to raise capital. I've done this myself. of course it is.  but you do know what i mean by "junk" companies yes? the issue is one of motivations and intentions, and these inevitably lead to discussions of morals. basically, what we saw in the 90's was similar to the junk bond issues we saw in the 80's.  In the case of "junk companies" There was no dissuasion for anyone who wanted to set up a company under false pretenses, then artificially inflate the stock value (it was - and still is- very hard to "nail" someone legally for doing this). This of course helped to contribute to the bubble we saw. I could argue a similar pattern occurring in the real estate market, with the bubble occurring from pure speculation, and Greenspan warning (as he did with tech investments) that real estate is in an artificially inflated bubble. the fed has only one apparent way of dealing with this: rate hikes. One wonders why rate hikes weren't more common during the "internet boom", considering Greenspan made essentially the same arguments at the time. right, so a small bit of history aside; it does come back to motivations and intentions, and thus how can it not inevitably lead to discussions of morals? I assume your morality (like mine) dictates that you wouldn't "abuse" start up funds from investors in order to just artificially inflate your company's value (for quick profit taking). However, it is a quite common practice (or at least used to be during the 90's).  so not all share these morals. in fact, many investors (and investment funds) specifically WANTED these kinds of quick turn-arounds on their investments.  ####, who can argue with a quick 500% or better return on your initial investment? same reasoning involved in why junk bonds were so "popular" in the 80's. Those of us with any morals saw the damage junk bonds would eventually cause, and the resulting S&L collapse will be paid for by all of us over several generations. If it were just about making money, I'd be all for junk bonds, real estate speculation, and stock speculation.   But it ain't.  So, if it isn't, then the only conclusion I can make is that regulations attempting to stem such behavior can only result from the moral implications involved with "passing the buck" basically.   A moral view, I would add, that is certainly NOT shared by many neocons. I have several times seen the pure generation of wealth presented as an argument for the functional purpose of any economy.  However, I have seen no support for that being a stable, or even a realistic, position when applied historically. But what makes it unstable?   Doesn't it inherently boil down to a perception of "fairness"? past experience of societal revolutions against pure top-down wealth structures are not based on generation of maximum wealth, but rather on a perceived imbalance in the distribution of that wealth. so, the inherent instability in a pure free market system has less to do, imo, with economics per sae, than it does with the application of morals and ethics.

Flint Posts: 478 Joined: Jan. 2006 (Permalink) Posted: Jan. 11 2006,14:13    Sir Toejam: Quote so, the inherent instability in a pure free market system has less to do, imo, with economics per sae, than it does with the application of morals and ethics. I think I understand what you're saying. Adam Smith's invisible hand was quite straightforward in saying that broad social benefits resulted from each individual actor being motived by pure short-term greed. I think the morality of short-term greed in the eyes of the Randroids has been morphed into a virtue, but Rand's fictional characters were painfully honest about their greed - which did NOT motivate them to lie, steal, and then vanish. The buyer can't beware if he has no information. And I don't understand how anyone can "artificially inflate" stock values using complete, accurate and timely information. Most of that information was deliberately incorrect. But maybe some of the junk tech companies weren't set up under false pretenses, they just quickly figured out that (a) they had a ton of money; and (b) their business plan couldn't work. Now what? Wouldn't YOU be tempted to stash away a bundle, go through some motions, and give up? Quote past experience of societal revolutions against pure top-down wealth structures are not based on generation of maximum wealth, but rather on a perceived imbalance in the distribution of that wealth. While I disagree in detail, I agree in general. People understand that wealth is never going to be very evenly distributed, and probably shouldn't be. I think revolutions are triggered by perceived violation of an implicit contract of mutual obligations. But regardless, these are still perceptions of "unfairness". I always come back around to information, though. If I took a risk based on an accurate representation of the situation, and the risk didn't pan out, I don't mind. But if the representation was wrong, then I very much mind.

sir_toejam Posts: 846 Joined: April 2005 (Permalink) Posted: Jan. 11 2006,15:18    Quote But maybe some of the junk tech companies weren't set up under false pretenses, they just quickly figured out that (a) they had a ton of money; and (b) their business plan couldn't work. Now what? Wouldn't YOU be tempted to stash away a bundle, go through some motions, and give up? It's true that some of these companies started out with what they thought were "legit" business plans, then realized too late they wouldn't work.  However, it's even more basic than that.  some of them were deliberately set up on the premise that the presentation of a flashy logo and a lot of PR would suffice in leiu of a product in order to generate increases in stock value. This was considered a legitimate business plan in and of itself.   Again, when we think in terms of "legitimate" business plan, you and I don't necessarily just think in terms of just equating that with "profitable".  Which means we include moralistic limitations to what constitutes a "legitimate" business plan.  There are a lot of investors who would see any business plan that would generate a significant return on their investment as "legitimate", regardless of whether any real product or service was intended or whether it was all an elaborate front intended to deceive. ####, I used to have a collection of these "companies" stored away on my links, but that was many computers ago.  I suppose it wouldn't be to hard to track some historical examples down; I'm sure someone has archived a few examples somewhere. I personally dealt with the mindset involved in forming feaux companies like this; the CEO of my own company was such a shark on raising investment capital in LA that he was famous, at least in "shark" circles .  He got called on it once or twice; but suffered only minor penalties.  less than a slap on the wrist, really.   His name is Rainer Poertner and he used to manage the Rolling Stones, once upon a time (no kidding!. I'd say he ran the gamut, from the production of products that were misrepresented as to their efficacy (entirely), using PR to generate capital investment instead of actual product sales (hmm, you might remember a product called "Soft Ram" that came out about 8 years ago?), to the co-option of businesses like the one I was involved with that actually DID produce legitimate products and services, but changed its business model almost yearly to accomodate the latest "trends" in internet investment. in any case, the bottom line is that, imo, what constitutes a legitimate business model, in itself, is dictated by preconceptions based on morality, rather than immediate profitability. many folks don't care about whether the companies they invest in survive long term, only whether they generate significant return in the short term.   There are an awful lot of ways to generate investment dollars short term that have nothing to do with a legitimate business model like you put forth, and I would agree with. Quote always come back around to information, though. If I took a risk based on an accurate representation of the situation, and the risk didn't pan out, I don't mind. But if the representation was wrong, then I very much mind. indeed, but as i pointed out, wouldn't you mind if the information was accurate, but representative of the type of business model I described above? I could come to you and say, "I have an idea on how to make money by pushing a fake business". that would be exactly representative of the situation, and there would be risk, but also accurately represented. they could even show a pretty good track record of success on significantly increasing your initial investment with this "business model". would you bite?

Flint Posts: 478 Joined: Jan. 2006 (Permalink) Posted: Jan. 11 2006,15:43    Sir Toejam: Quote I could come to you and say, "I have an idea on how to make money by pushing a fake business". That would be exactly representative of the situation, and there would be risk, but also accurately represented. They could even show a pretty good track record of success on significantly increasing your initial investment with this "business model". would you bite? Is this legal? It sounds almost like if someone came to you and said "I have devised a nearly foolproof way to rob banks, and if you'll fund the development of the necessary device, we'll split the proceeds." I'd really need to know my exposure here. I wouldn't want to be in the line of fire if "pushing a fake business" should run afoul of any criminal laws, you know? I should think constructing elaborate fronts with the intent to deceive are, shall we say, less winked at today than they were pre-Enron when everyone was getting rich selling one another spun sugar. Incidentally, there's a really fascinating article starting on Page 47 of the January 2006 issue of Science purporting to show that my basic economic assumptions aren't really justified, but are rather a subset of a larger (and I suppose you could call it "ethical") context. It's game theory, not necessarily easy reading, but I'm learning a lot. I recommend it.

sir_toejam Posts: 846 Joined: April 2005 (Permalink) Posted: Jan. 11 2006,16:13    Quote Is this legal? hmm. debatable.  I have seen a well presented argument that it is entirely legal, but I never bothered to followup because i considered the whole idea much like you just did. those that promote this kind of business plan are the WC Fields type; sucker born every minute and it's their fault if they get stuck type. In practice, it works out very much like a pyramid scheme, and as such, various laws could cover it, but there you would lose me.  I haven't checked into how the law is applied in these cases (the very few times they ever went to court). Quote I'd really need to know my exposure here. that would differ no more than any other "risk" factor to many investors. they could always claim they themselves were duped.  How could you prove they weren't?  because they made money? the only people really at risk are the CEO of the company itself, and related officers, and I'm quite sure there are many ways to minimize one's exposure, tho i wouldn't consider myself knowledgeable of the specifics. I HAVE seen several cases brought against fraudulent PR and "pusher" campaigns on blogs intended to artificially inflate stock prices, but even that is hard to prove (and isn't even always involved in these fictitious businesses). Quote I should think constructing elaborate fronts with the intent to deceive are, shall we say, less winked at today than they were pre-Enron when everyone was getting rich selling one another spun sugar. people said the EXACT same thing after the junk bond craze finally died out, and the S&L's were blown open. it will go quiet for a time, then resurface with a vengeance.  Again, i think there are a lot of loopholes for folks selling this type of business model to hop through. I haven't checked out how common they are at the moment, i kinda deliberately avoided staring at the issue after having been burned by something similar.  don't care to dredge up the muck, so to speak.  I'm sure if you are interested, you could even track this stuff down via googling. I do remember sitting at my desk one day a few years back, where we for a lark started tabulating the number of businesses that we could readily tag as fictitious, then checking on how their stock was doing. now don't get me wrong, junk businesses aren't nearly as common as honest ones, of course!  or even the case you noted above of mistaken optimism in a product line. but they are out there, and i have talked with the folks that have no moral issues with promoting them. Ever met somebody that has no problem with pyramid schemes? same mentality. I'll check out that article in Science next time i hit the library.  sounds interesting. we never really got much into game theory in this thread; it is an interesting topic and perhaps worthy of starting a new thread.   Perhaps I'll start a new one after I check out the article in Science. cheers

Dean Morrison Posts: 216 Joined: Dec. 2005 (Permalink) Posted: Jan. 13 2006,00:29    Seems that there is a new field 'Bioeconomics' which results from the crossover of economic theory and evolutionary biology. I wonder if it'll ever get to the point where a new economic policy can be tested out on the lab bench?

sir_toejam Posts: 846 Joined: April 2005 (Permalink) Posted: Jan. 13 2006,09:32    any chance you could expound on that a bit? the link you provided took me to a registration page instead of the article you were trying to reference.

Flint Posts: 478 Joined: Jan. 2006 (Permalink) Posted: Jan. 13 2006,10:00    When I clicked on Dean's link, I got Quote While trying to retrieve the URL: http://www.springerlink.com/(jjt3t2....03315,1 The following error was encountered: Unable to determine IP address from host name for www.springerlink.com The dnsserver returned: No DNS records This means that: The cache was not able to resolve the hostname presented in the URL. Check if the address is correct.

Flint Posts: 478 Joined: Jan. 2006 (Permalink) Posted: Jan. 13 2006,13:24    Sir_Toejam and haceaton: Here's the abstract of the Science article. I may need to rethink the influence some notions of ethics may have on economic activity... Abstract: (I have reformatted a bit for easier reading) Quote The canonical model in economics considers people to be rational and self-regarding. However, much evidence challenges this view, raising the question of when "Economic Man" dominates the outcome of social interactions, and when bounded rationality or other-regarding preferences dominate. Here we show that strategic incentives are the key to answering this question. A minority of self-regarding individuals can trigger a "noncooperative" aggregate outcome if their behavior generates incentives for the majority of other-regarding individuals to mimic the minority's behavior. Likewise, a minority of other-regarding individuals can generate a "cooperative" aggregate outcome if their behavior generates incentives for a majority of self-regarding people to behave cooperatively. Similarly, in strategic games, aggregate outcomes can either be far from or close to Nash equilibrium if players with high degress of strategic thinking mimic or erase the effects of others who do very little strategic thinking. Recently developed theories of other-regarding preferences and bounded rationality explain these findings and provide better predictions of actual aggregate behavior than does traditional economic theory. This article is by Colin F. Camerer of the California Institute of Technology, and Ernst Fehr of the Institute for Empirical Research in Economics, University of Zurich.

sir_toejam Posts: 846 Joined: April 2005 (Permalink) Posted: Jan. 13 2006,14:33    thanks flint. I'll definitely check out the article next time i hit the library.

Dean Morrison Posts: 216 Joined: Dec. 2005 (Permalink) Posted: Jan. 13 2006,14:33    Sorry.. I don't seem to get quite the same problem.. but more interesting as I look into it: some other stuff 'seems it was defined as a concept in '79' .. failing that 'google' for it... Role of culture and meaning in rational choice or Flint will like this one... ( the guy was from Chicago) 1979 Bioeconomics or apply economics to fisheries. and then wonder where all the fish have gone? Lobster Bioeconomics seems like 'Bioeconomics' started by applying 'sociobiology' to 'human economics; which seems self- fulfilling to me. I'm interested in the 'meta- mathematics' that, ecological, and financial, systems share....

sir_toejam Posts: 846 Joined: April 2005 (Permalink) Posted: Jan. 13 2006,14:37    Quote or apply economics to fisheries. and then wonder whre all the fish have gone? been there done that, several times. check out the history of the fishery for angel sharks off of CA, USA sometime. quite depressing. on the bright side, the idea of preserving breeding refugia is starting to take off, so maybe that will do something to stem the tide. I'm not gonna hold my breath tho.

Dean Morrison Posts: 216 Joined: Dec. 2005 (Permalink) Posted: Jan. 13 2006,14:54    We still have a thriving little fishing community right here on the English channel. A lot to do with all the wrecks and unexploded ordanance still lying around after a couple of World Wars, and the natural effects of being the busiest shipping lane in the world with a huge tidal range and a tempremental climate. Favours the small boats and the fish - the big boats lose all their tackle. Secondary income from **uggling of course - 'but if I told you I'd have to kill you' http://www.hastingsfish.co.uk/index.htm Lesson is ?

sir_toejam Posts: 846 Joined: April 2005 (Permalink) Posted: Jan. 13 2006,19:03    unlimited growth of an industry based on a very finite resource is bad?

Dean Morrison Posts: 216 Joined: Dec. 2005 (Permalink) Posted: Jan. 19 2006,00:13    Just to shed a little light on the 'public funding for prevetative healthcare' debate that came up earlier in theis thread: Dr Tara Smith talks eloquently on this subject on her 'Aetiology' blog: http://scienceblogs.com/aetiolo....hp#more

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