tscott - 31 January 2008 09:58 AM

Sorry my fellow skeptics, but most of the preceding discussion about economics is pure piffle. ...

I’ve studied economics for several years.

Economics is indeed incredibly complex; as complex as all the resources, goods and services in the world, and all the people and organizations that make decisions about their allocation.

Such traumas as the housing bubble and planned obsolescence are too often the result of inappropriate government action, than of anything else.  In the case of the housing bubble, the vast number of financial derivatives that obscured true risk assessment from the buyers of said derivatives was a failure of regulation vis-a-vis disclosure.  Planned obsolescence only works so long as competetion is stiffled - for otherwise the result would be a spiral of “yes, but our cars last longer than their cars”, until cars lasted as long as mechanically possible for a reasonable price.  I think those cars are called Toyotas…

So what happened to the depreciation of all of the cars regardless of whether of not there is planned obsolescence?

The number of cars in the US passed 200,000,000 in 1995.  So $1,500 in depreciation per car per year would amount to ....?

A bit much for economists to say nothing about every year, don’t you think?

The trouble with economics is that it promotes a belief in some economic philosophy before it actually teaches economics.  How do you do economics without accounting first?

http://www.coloradocollege.edu/dept/EC/Working%20Papers/2005-03.pdf

Curious you don’t hear economists suggesting mandatory accounting for everyone.  Double entry accounting is 700 years old.  How hard can it be with today’s computers?

http://www.bsu.edu/news/article/0,1370,-1019-11714,00.html

I think the system depends on a combination of Game Theory and Sun Tzu.  The majority of people need to be kept ignorant so they make poor decisions and lose most of the time.

All warfare is based on deception. - Sun Tzu

psik

psikeyhackr - 31 January 2008 08:10 PM

So what happened to the depreciation of all of the cars regardless of whether of not there is planned obsolescence?

The number of cars in the US passed 200,000,000 in 1995.  So $1,500 in depreciation per car per year would amount to ....?

Nothing happens (but, yes, of course, the depreciation of a car is the 100% of its value in the middle term), I don’t see any trouble with the depreciation of cars (or any other goods not used to produce other goods).

The amortization is used to measure the lifetime that a productive asset still has. It is used to know if we are compromising our capacity to produce things tomorrow because we are producing things today, and a car is not a productive asset. (I mean a car owned by a person, a car owned by a company is a productive asset and its depreciation counts in the NDP).

I can agree that NDP is a better measure that GDP, but it still doens’t count the depreciation of the cars, and it is OK, because we are measuring the depreciation of things that are used to produce others things.

I can agree that NDP is a better measure that GDP, but it still doens’t count the depreciation of the cars, and it is OK, because we are measuring the depreciation of things that are used to produce others things.

Had you noticed that economists said nothing about the depreciation of durable consumer goods before I brought it up?

psik

psikeyhackr - 01 February 2008 06:00 PM

Had you noticed that economists said nothing about the depreciation of durable consumer goods before I brought it up?

dougsmith - 02 February 2008 08:54 AM

psikeyhackr - 01 February 2008 06:00 PM

Had you noticed that economists said nothing about the depreciation of durable consumer goods before I brought it up?

psik

psikeyhackr - 01 February 2008 06:00 PM

Had you noticed that economists said nothing about the depreciation of durable consumer goods before I brought it up?

Do you mean economist in this board?.

Anyway, I think that every consumer knows that the goods he or she buys suffer a depreciation in its lifetime. I don’t get your point: do you think that depreciation is a bad thing that should not happen? do you think that the economist should tell the people that the goods they buy will lost its value sooner or later? another thing?

Regarding the NDP, as far I remember, it counts net investment, which means gross investment less depreciation less non planned investment (for instance, non planned stocks).

Barto - 02 February 2008 05:38 PM

Do you mean economist in this board?.

I’m talking about the professional economists who write the books, appear on television and influence government policy.

Anyway, I think that every consumer knows that the goods he or she buys suffer a depreciation in its lifetime. I don’t get your point: do you think that depreciation is a bad thing that should not happen? do you think that the economist should tell the people that the goods they buy will lost its value sooner or later?

I have talked to people who don’t know the word DEPRECIATION.  Some of them understood what I was talking about when I explained it but others don’t even bother to think about it.

The fact of the matter is that the laws of physics don’t change style from one year to the next and there is nothing any automobile manufacturer can do about it.  The price of the Model T went from $850 down to $300 during its production life.  I am sure it costs a lot to retool factories to make cars look different year after year and that cost must be included in the price of the car for the manufacturer to make a profit.  A new car can lose 25% in depreciation in the first year, not because of wear and tear but because the next year’s model will look different.  It is like consumers are paying to screw themselves.

Galbraith talked about the planned obsolescence of cars in his 1959 book, The Affluent Society.

A scientist is supposed to observe, analyze and accurately report what happens in reality.  By not doing that in relation to the depreciation of durable consumer goods the entire economics profession is being unscientific.  I have emailed more than 3,000 economists about this including, Lester Thurow at MIT, Robert Barro at Harvard, Jeffery Sachs when he was at Princeton and plenty of unknown economists.

A professor at the University of Calgary called me a LOONY.  I sent back to him, “You will never know how much it pains me to be called a loony by a member of a profession that can’t do grammar school algebra.” He did not respond.  LOL

http://discussions.pbs.org/viewtopic.pbs?t=28529

I have only gotten 15 responses from those 3,000 economists.  It is certainly ironic that the US killed 3,000,000 Vietnamese over this Capitalism/Communism crap and yet 30 years after the Vietnam War our capitalist economists can spout off about globalization but they can’t tell the American people how much they have lost on depreciation of automobiles since that war ended.  I was in the draft lottery for that crap.  I failed to win an all expenses payed vacation there.

psik

psikeyhackr - 02 February 2008 09:45 PM

I have talked to people who don’t know the word DEPRECIATION.  Some of them understood what I was talking about when I explained it but others don’t even bother to think about it.

Well… I am not going to make any claim about the US, but the lack of knowledge about simply facts of economics I see in a lot of smart people sympthom of a problem in the education.

I am sure it costs a lot to retool factories to make cars look different year after year and that cost must be included in the price of the car for the manufacturer to make a profit.  A new car can lose 25% in depreciation in the first year, not because of wear and tear but because the next year’s model will look different. 

Not only that you are paying research and development (not only in automobile industry… in pharma and software you pay mainly research and development because the duplication cost is trivial), when you buy your old car there is a cost due to information assimetry: the buyers ignores the real state of your car, ignores if you were an abussive owner or not, so he/she needs to add an plus of depreciation… more than the depreciation that would be suitable for a normal use.

It is like consumers are paying to screw themselves.

In a way, yes. But we can take another approach: consumers are paying to keep the things going and to have a job. In the micro level, the offer doens’t build up its demand, but at the macro level the offer produces a lot of demand.

A scientist is supposed to observe, analyze and accurately report what happens in reality.

Well, I think the economist observe, analyze and try to accurately describe what happens. Of course, some of them have agendas, so their put it in their observations, but I think economics still worth the effort.

A professor at the University of Calgary called me a LOONY.  I sent back to him, “You will never know how much it pains me to be called a loony by a member of a profession that can’t do grammar school algebra.” He did not respond.  LOL

Well, not everybody has the energy to answer every question… I had teachers who lacked the pacience to answer their student’s question… so image a email question.

It is certainly ironic that the US killed 3,000,000 Vietnamese over this Capitalism/Communism crap and yet 30 years after the Vietnam War our capitalist economists can spout off about globalization but they can’t tell the American people how much they have lost on depreciation of automobiles since that war ended.  I was in the draft lottery for that crap.  I failed to win an all expenses payed vacation there.

The calculation is not so hard (the added amortization, not the individual): Lets stablish a lifetime for a car . Here in the third world it could be stalished in 20 years, I assume it would be much shorter in the US, lets say 10 years: so they had lost the entire amount of money used to buy cars between the end of the war (in 1976?) to 1997. Lets asume that a cars loses a 30% of its value the first years, the 15% the second, and the rest proportionally till the end… the calculation is really simple (as you said… it is elementary school algebra).

I will start by saying that I am no economist. 

However, it is clear to me that economics has a irrefutable tie to government policies, behaviors of large corporations, and the freedom they have to manipulate government policies. Consumer behavior can be measured and in some cases manipulated by both.  Consumers are free to choose only what they are offered.  Competition exists only when government policy and/or the Corporatists will allow it, and then only within the laws and constraints they enforce, by law or threat of lawsuit.

An economy is not something we merely observe like the weather, it is something that is routinely manipulated by politicians, corporate behaviors and of course resources.  From my perspective as one who has been uncorrupted by the halls of academia, I have observed some interesting trends.

1) An ever increasing concern for the welfare of investors/shareholders.
2) A increased, glaring (elephant in the room), lack of concern, for the cost of corporate liabilities that are passed along to the public.
3) More cheap, poor quality goods, that no one really needs, with hard core marketing behind them.

To the extent that economists, withany kind of science to back them up, saw this coming, they are deafening in their silence.  For example, warnings of recession have begun to emerge from the pundits, but seemingly after the fact. 

Near as I can tell, generally, science gives us some reasonable means to predict the outcome of various experiments.  To the extent that economics might qualify as a science, regardless of how complex they claim it to be, I have heard little, that is any more credible, than I would hear from an astrologer or a psychic.

The trends I pointed out earlier are desirable for those who value the welfare of investors over laborers.  And since, they also happen to control most of the wealth it should be no surprise that these trends are prevailing over other possibilities. 

I have also noted some contrasting trends.  Bill Gates, one of the richest dudes on the planet, recently has discussed what he calls “Creative Capitalism”.

“The least needy see the most improvement, and the most needy see the least improvement, especially those that live on less than $1 a day,” Mr Gates warned.

Climate change, meanwhile, had “the biggest impact on those people who have contributed least to its causes”.

Mr Gates, who by some calculations is still the richest man in the world, said the genius of capitalism was that it made self-interest serve the broader interest of society.

However, there was one drawback. “As wealth rises, the financial incentives to help people rises, as they get poorer, it falls,” and the world’s poorest were losing out. 

The Red Campaign seeks to work against this trend by taking profits from various product lines and distributing them to the needy.  But this is just a token gesture, not an economic trend.

Using intuition alone, I feel a great affinity for the type of Free Market described by Robert F. Kennedy Jr.

The definition of Free-Markets as envisioned by so-called conservatives has also ignored the liabilities. The Free-Market, described by Robert F Kennedy Jr. in his speech, attacks this misconception directly. If the commons (a wide variety of resources), that are owned by all of us, are to be exploited in any way, then those who benefit, must share the burden of the liabilities in equal measure. In addition, the profits they enjoy, should be fairly distributed to those who are impacted by their efforts to extract and process the resources as a means of compensation.

I don’t see this discussed by any of the candidates. (Maybe with the exception of Edwards, now out of the campaign).

I realize that I am running outside the boundaries of this topic, but it seems as good a time to bring it up as any.  And this is a great audience for it as well. 

I think we can all see that there are some issues with the way the economy is operating right now.  We have politicians who are making all kinds of promises as to how their policies will provide some kind of stimulation to the economy that will result in a more positive outcome for more of us.  And yet, we have little to base our opinions on other than what we hear from pundits and the politicians themselves.

So, as skeptics, and people who prefer a scientific approach to one based on tea leaves, how are we to judge what we are told by these people?

I think in the end, it is less an issue with economic science, and more to do with political idealism and it’s influence on economics.

Barto - 03 February 2008 05:06 PM

The calculation is not so hard (the added amortization, not the individual): Lets stablish a lifetime for a car . Here in the third world it could be stalished in 20 years, I assume it would be much shorter in the US, lets say 10 years: so they had lost the entire amount of money used to buy cars between the end of the war (in 1976?) to 1997. Lets asume that a cars loses a 30% of its value the first years, the 15% the second, and the rest proportionally till the end… the calculation is really simple (as you said… it is elementary school algebra).

Like Charles I don’t have a degree in economics either.

But I noticed that the economics profession was ignoring the depreciation of durable consumer goods in 1976.  So I have sort of made a hobby of economics since then.  I do not regard economics as a science.  It seems to be mostly a load of BS to keep the majority of people confused.  My opinion of what politicians say about the economy is even lower than my opinion of what the economists say.

But this business of ignoring depreciation does not just apply to the United States.  As far as I can tell every country in the world has adopted a similar way of thinking about economics.  It is like mass group think that is fundamentally WRONG.  The laws of physics are the same all over the world and the cars depreciate everywhere and that depreciation is ignored everywhere.  How do you run the economy of a planet with 6,500,000,000 PEOPLE on BAD ALGEBRA?

Into the ground?

psik

I think the problem is that the most publicized economists are government ones, and that’s like the cartoon I saw of a government scientist standing at his desk while the politician hands him three papers and says, “Here is the research you are to do.  Here are the results, you are to get.  And here is the funding for your project dependent on your results.”

Occam

I think another part of the problem is the insistence that consumerism is capitalism instead of a variant of capitalism.  Possibly a very stupid variant.

Consumerism is the result of technological change increasing productive capacity so much that necessities are exceeded by such a large amount that people need to be encouraged to consume for stupid reasons to avoid market saturation.

Planned obsolescence with a lot of depreciation on the consumer side is the result. But the economics profession ignores that depreciation and actually DEFINES it out of existence. They define depreciation as applying to capital goods only. So as far as economists are concerned most of the automobiles in the US don’t depreciate.

The banks and used car dealers don’t agree. so consumers are supposed to be STUPID.

This technological change occurred between 1880 and 1920 in the US. Cars and electric power distribution were major factors. But the concepts of GDP, NDP and subtracting mass depreciation were not developed until the 1930s.

I think the powers that be emphasize their social philosophy and try to use economics to rationalize that philosophy.  There is no reason why accounting could not be mandatory in the schools in a capitalist society.  That might be a threat to the power of the richest class and the bankers though.  But planned obsolescence with consumerism may have created or aggravated this global warming problem I find it quite interesting that I haven’t heard of any climatologists pointing this out to the economists.

But the laws of physics do not care about anyone’s social philosophy.  The laws of physics cause automobiles to wear out whether they are capitalist, communist, consumer or socialist goods.  So ignoring the depreciation of any of them in any country is scientifically invalid.

psik

psikeyhackr - 04 February 2008 10:36 PM

But I noticed that the economics profession was ignoring the depreciation of durable consumer goods in 1976.

I don’t know what the status of economics was in 1976 (I was 1 year old in 1976), but nowdays economics take into accound depreciation. Of course, depreciation is not taken into account in the product variables (because these kind of variables are flow variables) but in the wealth variables (which are stock variables). Don’t you pay taxes because of your wealth? do you have the right to drop your goods valuation year after year (the same goods, not new ones)?… well, this is because everybody knows your goods depreciate.

It seems to be mostly a load of BS to keep the majority of people confused.

Well, in my opinion, economics concepts are straighforwards and easy to understand (much more easier than solid state physics, for instance).

But this business of ignoring depreciation does not just apply to the United States.  As far as I can tell every country in the world has adopted a similar way of thinking about economics.  It is like mass group think that is fundamentally WRONG.  The laws of physics are the same all over the world and the cars depreciate everywhere and that depreciation is ignored everywhere.  How do you run the economy of a planet with 6,500,000,000 PEOPLE on BAD ALGEBRA?

Of course that depreciation doens’t only occurs in the US, but the depreciation is not only a matter of physics laws. What I’d said before (the information assymetry) is another reason. The purchase power is another: I need to have the same car more years than an americans needs to have theirs, so here the lifetime of the car is longer. In fact, maybe in USA the cars depreciate before the limit impossed by the physics. Here the car’s lifetime goes beyond what would be advisable according to the laws of physics.

I can agree that there are troubles with our economy system (the needed for a continious growth in GDP, for instance), but it doens’t make the study of our economy worthless or biased.

Occam - 05 February 2008 12:40 AM

I think the problem is that the most publicized economists are government ones, and that’s like the cartoon I saw of a government scientist standing at his desk while the politician hands him three papers and says, “Here is the research you are to do.  Here are the results, you are to get.  And here is the funding for your project dependent on your results.”

I think that Laffer’s curve is a good example of what you are saying.... a politician saying ‘I want to cut taxes, build a model to predict that it would be good for the economy, no matter how high is our deficit’ and an economist building such model.

I don’t know what the status of economics was in 1976.

I’m not sure what you mean by status or how it’s changed besides there being more economists.

depreciation is not taken into account in the product variables (because these kind of variables are flow variables) but in the wealth variables (which are stock variables). Don’t you pay taxes because of your wealth?

There are taxes on land but there are taxes on cash flow also.  There are income taxes and sales taxes.

economics concepts are straighforwards and easy to understand (much more easier than solid state physics, for instance).

I went to college for electrical engineering.  Economics is a JOKE.  The control of land and the misinformation about economics is the basis of global economic power games.

I can agree that there are troubles with our economy system (the needed for a continious growth in GDP, for instance), but it doens’t make the study of our economy worthless or biased.

It is definitely biased since that GDP partly depends on ignoring the depreciation of junk and not telling everyone.

psik