Okay, so I think it's fairly evident that I'm way too outspoken, considering how uninformed I am. I get interested in a topic, go to the store, and buy a book about it. And if they'd just stop sending me copies of Glamour and Allure every month, I might be able to get some real reading done. That's not to say that if I read books, I'd be able to figure out the meaning of life or something. Anyway...questions about economics and society:

I think Americans are "too" wasteful. We drive too much, use too much toilet paper, opt for cheap and disposable over quality, etc... But supposedly this crazy consumerism is a driving force in our economy. Is this true? If so, is their a balance we can reach? Is it best for me to accept the wastes of our economic system in order to enjoy the benefits? "Yeah, there's a lot of waste but look at this variety--I can pick between three dozen types of tampons! And, look--no line at the checkout counter yo."

Another one:

I think we're having too many children. But supposedly we need to keep making babies so that there will be someone to pay into social security and take care of the older folks. This seems crazy to me. Is it crazy?

[Edited on February 25, 2006 at 10:41 AM. Reason : sss]

2/25/2006 10:41:05 AM

Consumerism is only a driving force in the short term. Increasing consumption lowers investment. It also leads to the huge debt problems we have right now.
As for the children, it doesn't matter much either way. We're passing them a huge debt regardless of how many there are.

2/25/2006 11:27:29 AM

go tell africa or someone that we're having too many children.

2/25/2006 11:37:42 AM

social "security" hahahahahhahah!

2/25/2006 11:38:30 AM

Thoughts from a senior in economics:
The first question is really whether this waste is an actual problem or not. The answer is that it depends. People have the idea that we have so much garbage we're running out of room for it which is utterly false (see Penn & Teller's Bullshit:Recycling for an entertaining, but enlightening experience). Now, a lot of our waste (what we generally call pollution) is a problem and a completely free market probably won't handle the situation on its own. That's because pollution is what economists call "externalities." Some regulation (of the type in place now, like pollution trading credits and taxation) is helpful, but the problem with it is that its not consistent enough or focused enough. Those can be fixed.

Second Question: If the social security system needs us to create more people just so it can pay off the current people (which it in some way does) then it should be completely abandoned. What's happened here is the government has created a defined benefit pension plan. These are an abomination of economic thought. If you look into the private sector, companies are abandoning these and/or going out of business because of them. Its simply not a feasible income security plan. While politically--and to some extent economically--debatable, I find a defined contribution plan to work much better. This is tagged "privatizing" social security, but in actuality, its much better for people rich and poor. Obviously it isn't cut and dry or there'd be less confusion about it, but I find that a properly administered defined contribution plan would work wonders for the public (very similar to 401ks and 403bs that people have at work.

Hope some of this helps, and if you have any other questions, let me know

2/25/2006 11:42:01 AM

Quote :

"Kris: Consumerism is only a driving force in the short term. Increasing consumption lowers investment. It also leads to the huge debt problems we have right now."

Exactly. So if we lower consumption to -0-, investment will go through the roof, debt will disappear and we will reach economic nirvana.

[Edited on February 25, 2006 at 12:37 PM. Reason : ]

2/25/2006 12:37:35 PM

Quote :

"I think Americans are "too" wasteful."

You only think this because Americans consume SO much. My God, per capita, we consume more "goods" and "services" than most other countries. But when you ask "why" the answer is economic. We consume so much because, by golly, we produce so much. 1/5th of the world's economy flowes out of our factories and offices.

Trust me on this: if the average African was more productive than the average American, then you'd be reconing that you thought "Africans were "too" wasteful. They drive too much, use too much toilet paper, opt for cheap..." etc etc. <end dream sequence>

But this isn't a rule, just because we are productive doesn't mean we must consume so much. But Americans would have to learn not to work so much. Ask for more time off, refuse overtime, get your wife to quit working, etc. Such actions, of course, could cause more harm than just reduced salary because they would cut against social norms, you would confuse your boss in the least.

2/25/2006 12:46:20 PM

.

[Edited on February 25, 2006 at 12:56 PM. Reason : rethought the question]

2/25/2006 12:55:56 PM

Quote :

"Consumerism is only a driving force in the short term. Increasing consumption lowers investment. It also leads to the huge debt problems we have right now."

Alright, I'm about to bust out some serious ignorance, and I understand if you guys don't wanna take the time to explain it to me...

How does increasing consumption lower investment? And how is consumption related to debt? And what debt are we talking about? Personal debt, like credit cards and loans and stuff? Government debt to American citizens?

I think I get the consumption/investment thing. The more money we spend consuming, the less money there is to invest? I still don't get the consumption/debt thing unless it's in the sense of personal debt.

[Edited on February 25, 2006 at 1:27 PM. Reason : sss]

2/25/2006 1:03:26 PM

Quote :

"xactly. So if we lower consumption to -0-, investment will go through the roof, debt will disappear and we will reach economic nirvana."

I never indicated that it was nearly that simple, and obviously we can never reduce consumption to zero due to autonomous consumption.

Quote :

"How does increasing consumption lower investment?"

You'll really need to look at a graph to understand that. Basically whatever income is not consumed is invested, and if marginal consumption increases, less money is availble to invest.

Quote :

"And how is consumption related to debt?"

When people invest less, debt tends to increase as people have less money to "fall back on". And as we've just discussed, as people spend more, they invest less. Please note here that I'm discussing percentages here, and when I say "people" it can be applied to consumers, businesses, or the government.

Quote :

"And what debt are we talking about? Personal debt, like credit cards and loans and stuff? Government debt to American citizens?"

There are three different kinds of debt, consumer debt, business debt, and government debt. There has been an increase in consumer debt recently, to fully understand it, you'll have to check out your local library. And as for government debt, we tend to focus more on the Balance of Payments deficit rather than the money the government owes to it own citizens. The Balance of Payment deficit is money the government owes to foriegn countries and banks, it's fairly complicated, and if you want to know much more that what I've told you here, it will involve a trip to the library.

2/25/2006 1:29:24 PM

^^ He is a communist. He doesn't believe "investment" is just another form of "consumption." The vast majority of "investment" in a modern economy goes to construct "goods" which are directed towards "rent seeking" (malls, offices, houses) which will never actually produce anything that wouldn't already have been produced.

Examples include: building a new Mall, a McDonalds, a starbucks, etc: people would have just shopped elsewhere.
Offices and Houses: beyond population growth, the construction of new houses causes existing houses to be vacated/abandoned.

Secondly, he is blinded by ideology to notice that the current account deficit is not domestically driven. Interest rates are lower or on par in the United States when compared to most other industrialized countries (Japan is a noted exception). This also explains why Americans are not saving like they used to: the return on doing so compared to alternatives has dropped. For example, you're better off owning Google stock, which isn't counted towards your savings, than a savings bond, which is. Americans are not actively seeking to borrow money from overseas, the only way to do that would be to offer higher interest rates, which we are not doing. Therefore, what is happening is being caused by something other than American glutony.

What is more likely is that Foreigners have noticed companies operating in America are seeing greater profit growth than foreign options. As a result, Foreigners are eager to capture a piece of that growth by investing their money in America. This one way capital surplus is driving a trade deficit.

[Edited on February 25, 2006 at 1:38 PM. Reason : ^]

[Edited on February 25, 2006 at 1:43 PM. Reason : goog]

2/25/2006 1:38:03 PM

Quote :

"He doesn't believe "investment" is just another form of "consumption.""

I never said it wasn't, but there are key economic effects that can differentiate between the two.

Quote :

"The vast majority of "investment" in a modern economy goes to construct "goods" which are directed towards "rent seeking" (malls, offices, houses) which will never actually produce anything that wouldn't already have been produced."

Another large part of it goes to expanding businesses to directly increase production.
You seem to think that breaking a window leaves to an overall increase in wealth.

Quote :

"So, obviously, Americans are not actively seeking to borrow money from overseas, the only way to do that would be to offer higher interest rates."

That doesn't change the fact that we are borrowing large amounts of money from overseas.

Quote :

"As a result, Foreigners are eager to capture a piece of that growth by investing their money in America."

I'd argue that they've already given us so much money it is in their best interest to keep giving us money to keep us from defaulting. They're simply buying floats for a sinking ship.

You seem to want to only discount me due to my personal economic beliefs. Nothing that I have said in this thread, prior to this post, could even be argued as incorrect.

[Edited on February 25, 2006 at 1:56 PM. Reason : ]

2/25/2006 1:47:04 PM

^

Quote :

"Kris: You seem to want to only discount me due to my personal economic beliefs. Nothing that I have said in this thread, prior to this post, could even be argued as incorrect."

...except your first post

2/25/2006 1:51:49 PM

maybe "huge debt problem", but considering the sheer number of books concerning the debt problem I felt comfortable in calling it a "problem"

2/25/2006 1:57:24 PM

Quote :

"Another large part of it goes to expanding businesses to directly increase production."

You completely ignored what I said. I said the vast majority of all "investment" taking place in a modern major economy is directed towards rent seeking and not productive capital accumulation. Yes, wealth accumulation (yahts, big houses, etc) is another form of investment which is indistinguishable from consumption. How does that help your case that investment is good, consumption is bad, when you further demonstrate that the two are nearly always indistinguishable?

Quote :

"I'd argue that they've already given us so much money it is in their best interest to keep giving us money to keep us from defaulting. They're simply buying floats for a sinking ship."

You would first have to demonstrate that the US is capable of defaulting, in the classical sense. Our loans (bonds) are delineated in $US. Our Government has the ability to print fucking money.

Worse-case-scenario: Foreigners refuse to loan the US Treasury money. Solution: The Federal Reserve buys US Treasury bonds from US Banks, the banks, in turn, use the money to purchase more US Treasury bonds from the US Treasury, rinse and repeat. Net effect: The Federal Reserve has printed money, gave it to banks, the banks gave it to the Treasury, the Treasury used it to pay off foreign debt with US currency.

Yes, it would cause inflation. Yes, it would be a horrible solution. But it demonstrates that the US defaulting on its Treasury bonds is akin to... well, I have no idea... Something too unlikely to even bother considering it.

2/25/2006 11:29:00 PM

Quote :

"Yes, wealth accumulation (yahts, big houses, etc) is another form of investment which is indistinguishable from consumption."

Buying a big house or a yacht, etc. is distinguishable from investment. If I buy a house, yes I can get a yearly increase in my money, but there is a large difference between buying a house or buying stock or bonds or putting it in the bank, namely no one else can use that money if it is in the form of a large house. If I invest the money, it continues to travel through our economy. Buying a house/yacht/etc. is consuming, not investing.

Quote :

"How does that help your case that investment is good, consumption is bad"

Is that my case? Where did I say consumption was bad and investing was good? It completely depends on the economy. Some economies do not consume enough, some consume too much. It's "goodness" is relative.

Quote :

"You would first have to demonstrate that the US is capable of defaulting, in the classical sense. Our loans (bonds) are delineated in $US. Our Government has the ability to print fucking money."

Devaluing our currency is, in effect, defaulting on the loan. I never said we were going to refuse to pay it or claim bankruptcy, that's just plain silly.

Quote :

"Yes, it would cause inflation. Yes, it would be a horrible solution."

I agree, and if those foriegn banks refuse to keep buying us floats, it's a reasonable possibility.

2/26/2006 12:30:17 AM

Quote :

"Kris: ...but there is a large difference between buying a house or buying stock or bonds or putting it in the bank, namely no one else can use that money if it is in the form of a large house. If I invest the money, it continues to travel through our economy. Buying a house/yacht/etc. is consuming, not investing."

2/26/2006 10:07:06 AM

Buying a house isn't investing?

Explain, plz.

Good idea for a thread, btw. Where is Socks`` when you need him?

[Edited on February 26, 2006 at 12:30 PM. Reason : ...]

2/26/2006 12:29:54 PM

a house is a liability

2/26/2006 1:26:44 PM

Quote :

"Buying a house isn't investing?"

Macro-economically speaking, it's consumption, simply in that when you buy a house, that money isn't recirculated as it is when you buy a stock or bond. Generally this is a intro to marcoeconomics topic and most professors used the buying gold versus buying stocks example and discuss the real value of currency.

To the consumer it's an investment in that you put money into it with some amount of risk involved and you hope to get a larger return than your initial investment.

[Edited on February 26, 2006 at 1:42 PM. Reason : ]

2/26/2006 1:41:31 PM

^wtf

2/26/2006 3:38:56 PM

Quote :

"Gamecat: Where is Socks`` when you need him?"

IIRC he was on a quasi-hiatus, mostly b/c of threads like this (or, rather, the eventual contents thereof )

[Edited on February 26, 2006 at 5:21 PM. Reason : ---]

2/26/2006 5:21:07 PM

A house definitely wasn't used as an example of consumption when I took intro to mac. Then again, we spent most of our time fighting off the pterodactyls. Carry on...

2/26/2006 9:39:38 PM

kris knows his economics but can't put it in words for people to understand.

all investments are is buying something that can make you money in return. like if you own a restaurant and invested in better cooking equipment to cut down on the costs of cooking your food.

increasing consumption lowers investments. this is a basic idea in economics. spend now or spend later. consumptions also includes government spending. say a person has a $100 income and wants to buy food with it. he could spend it all, or spend some of it and save some of it for later. he also could spend all of it and borrow money from someone else, but then he'll be in debt.

i think everyone should take ec302 (w/ mcelroy because he knows his shit). it's good for the soul like chicken soup.

3/1/2006 1:22:35 AM

and the money he spends disappears into a black hole

3/1/2006 8:17:59 AM

^^ He may understand economics, if you say so, but he doesn't understand the workings of a modern economy.

3/1/2006 10:59:38 AM

if we don't enjoy ourselves & be wasteful, how will we ever come up with innovations so that we can keep things enjoyable?

3/1/2006 11:09:32 AM

haha, modern economics. please explain how this modern economics is any different from classic economics or economics in general?

^^^ sometimes, it's better to deduce things into simple situations so you can get a better understanding.

[Edited on March 1, 2006 at 12:08 PM. Reason : .]

3/1/2006 12:05:43 PM

Perhaps I mispoke... "Modern" economy implies a new economy, while it is only different in kind.

I suspect what I should have said is Kris may know economics, if someone says so, but he does not understand the real-world economy.

In the real-world, the vast majority of "investment" in the real-world does not go towards increasing future production, it goes towards rent seeking. He has not and cannot address this fact with his communist philosophy because it looks too much like consumption while in fact it has become a major driving force towards higher living standards nowadays.

[Edited on March 1, 2006 at 12:58 PM. Reason : eh]

3/1/2006 12:55:10 PM

still that's nothing different from the economics i understand. rent seeking is just a form of regulation whether it's tarriffs or price controls.

3/1/2006 2:18:03 PM

Um, my bad, I think. When I say "rent seeking" I mean it literally. A guy who builds a shopping center, builds an apartment complex, he is seeking to collect rent from other people and businesses. He is taking such rent from other rent seekers (my apartment complex drains yours of tennents)

This is not "productive investment" as a communist will tell you, as the tennents vacated other apartments, and the businesses vacated other shopping centers. My investment did not result in a greater GDP beyond the initial construction work, it merely shifted rent from others to myself. It is this activity which gobles up most official investment.

[Edited on March 1, 2006 at 2:30 PM. Reason : GDP]

3/1/2006 2:27:22 PM

Quote :

"and the money he spends disappears into a black hole"

Just like the money spent to fix a broken window, it's the same concept here. Yes the money you spend buying a house does help the economy, indeed the economy depends on consumption to some degree, but the money you spend on your house doesn't directly contribute to increased production.

Quote :

"He may understand economics, if you say so, but he doesn't understand the workings of a modern economy."

I understand the modern economy. It's people like you who say the it works better without the government that ignore the modern concepts of aggregate demand and supply and externalities and the government's role in all of these. To put it simply, the capitalist economy doesn't work without the government there to plug it's holes and adjust for its shortcomings. It took the great depression and J.M. Keynes for the world to realize this. Now thanks to Reagan, classical economy has come back, yet it comes back with the same shortcomings that lead us to the economic failure and despair that lead to it's short-lived death.

Quote :

"he does not understand the real-world economy"

No, you simply don't understand the concepts I'm discussing here.
Your statement "Yes, wealth accumulation (yahts, big houses, etc) is another form of investment which is indistinguishable from consumption." is dead wrong.
Certain investments like buying stock and expanding your own business directly increase production, consumption does not. There is an obvious distinction there.

Quote :

"does not go towards increasing future production, it goes towards rent seeking"

Much of the "rent seeking" you are refering to does directly contribute to increasing production. For example, if you have an apartment business, building a new complex is investment just like buying new machines to put on the factory line. The two are the same. Both expand business.

The problem here is not that I don't understand real world economics or that such and such does not fly with my communist philosophy, the problem here is that you do not understand macro-economics. These distinctions I have been speaking of should be discussed in any intro to macro course in the section discussing investing.

[Edited on March 1, 2006 at 5:10 PM. Reason : ]

3/1/2006 5:08:57 PM

so wouldn't this "rent seeking" just be competition between the apartment complex?

3/1/2006 7:25:49 PM

There is obviously competition in that market just like and other non-socialized or non-monopolized market. So some of it is simply competition, but some of it is opening and expanding markets as well.

3/13/2006 1:19:43 PM