You omitted a few inconvenient things, for example:
- agricultural production declined in 2006
- you completely omitted a central point of the article, namely that the Bolívar Fuerte alone is useless to combat inflation.
- the 20% are correct and it is not claimed that the living standard declined therefore 20%, that's something you're laying in their mouth. This point is merely an illustration of the decline in value of the soon to be "Bolívar (supposedly) Fuerte".
- if the economy were working that well, without price regulation distortion, supply and demand would have adjusted, preventing shortages (Microeconomics 101 class)
This is why I've pretty much given up on the New York Times, which is too tightly tied to the official Washington worldview.
I have started looking at the International Herald Tribune, owned by the Times. They have a blogger named Daniel Altman their global economics "expert." At least with the blog you get a chance to challenge his the opinions. He says outrageous things, like, "in Venezuela, [the government] may indeed - depending on which statistics you believe - be raising living standards for some very poor people." Uh, is he looking at those ever popular 2003 statistics again?
And "given his attitude towards the United States, Chavez might well choose to punish the White House by sending his oil elsewhere...it’s also worth considering that Chavez is unlikely to have so perfect an enemy as Bush after the elections of 2008. What if Hillary Clinton or John McCain were president? Could Chavez muster as much hatred for either of them, if only for his own political ends? I doubt it." Uh, he would probably get along with them until they made their first coup attempt?
Altman, the eonomics "expert," never considers the possibility that it's simply bad business to put all your eggs into one basket by selling primarily to one overbearing customer. It makes sense for the US to diversify it's stable of suppliers, and it makes sense for Venezuela to diversify its customer base. In both cases it's called energy security.
"- agricultural production declined in 2006"
True. That is what results from an overvalued currency as I have said many times.
"- you completely omitted a central point of the article, namely that the Bolívar Fuerte alone is useless to combat inflation. "
Is it being said by someone that alone will reduce inflation. I think they are taking other measure too. The point of changing the currency is in large part just to make arithmatic and accounting less cumbersome.
"- the 20% are correct and it is not claimed that the living standard declined therefore 20%, that's something you're laying in their mouth. This point is merely an illustration of the decline in value of the soon to be "Bolívar (supposedly) Fuerte". "
Wrong, the value of a currency is determined by what it can buy. A Venezuelan today can go and buy just as many bus tickets, for example, today as they could in January (ok, a few percent less). So the bolivar did NOT lose 20% of its value since January. Only against some foriegn currencies has it lost that kind of value.
"- if the economy were working that well, without price regulation distortion, supply and demand would have adjusted, preventing shortages (Microeconomics 101 class)"
What is a shortage? Food consumption is way up. So clearly there is not a "shortage" of food being consumed. I know in Honduras the grocery stores in the capital are well stocked. No one talked about "shortages", yet there were lots of people who weren't getting enough to eat. And if you look just at the famous "supply and demand" there is no shortage of health care in the U.S. Anyone who has money can get healthcare. yet millions don' thave it You should think about what these things mean. It may be that monetary demand is often different from real demand (what people want and/or need)
If the food is flying off the shelves, that can only mean one thing: PEOPLE CAN AFFORD MORE.
Why is basic logic so beyond the comprehension of the Newspaper of (cough) Record?
You mean, the editorial was written by the same NYT that said that Chavez brought the 2002 coup upon himself?
what the hell?
http://www.bloomberg.com/apps/
ne...id=a3PnpCPIY1XM
is this a good idea?
- "True. That is what results from an overvalued currency as I have said many times."
Or from misguided land reform? 
-"Is it being said by someone that alone will reduce inflation. "
Yes, and you know it.
- "Wrong, the value of a currency is determined by what it can buy ... "
It has declined 20% vis-à-vis most currencies. A "strong currency" implies appreciation or constant exchange rates vis-à-vis other ones.
As stated, this point is merely an illustration of the decline in value of the soon to be "Bolívar (supposedly) Fuerte" (vis-à-vis other currencies).
Moreover, as Venezuela is not an autarky, a 20% depreciation will also affect all prices which in some manner depend on imports, although below a 20% increase.
- "What is a shortage?"
And, asking this, you reproach the NY times of not considering economics. A shortage is a disequilibrium in the market, generated by excess demand and insufficient supply.
Anonymous: All Power to the Soviets!
The 20% bit is economic ignorance, or plain lack reading comprehension, the 20% inflation was Feb 2006 to Feb2007 but the fool thinks it was from Jan2007 til Feb2007.
Anyhow idiots will be idiots
"
It has declined 20% vis-à-vis most currencies. A "strong currency" implies appreciation or constant exchange rates vis-à-vis other ones.
As stated, this point is merely an illustration of the decline in value of the soon to be "Bolívar (supposedly) Fuerte" (vis-à-vis other currencies).
Moreover, as Venezuela is not an autarky, a 20% depreciation will also affect all prices which in some manner depend on imports, although below a 20% increase."
Wrong it is opo freakonomics, and lies.
Excellent dissection of the editorial, ow.
I've sent it to the NYT to see if it gets a response, although in their imperial arrogance I doubt they will deign to reply.
"Wrong it is opo freakonomics, and lies." *yawn*
Bina, die Leute koennen sich das leisten, weil der Staat Milliarden einfach so herumwirft. Und der Staat wirft diese Milliarden so herum, weil die Erdoelpreise 5mal hoeher sind als 1998 (Und das hat kaum mit Chavez zu tun. Was von China und Indien gehoert und Erdoelnachfrage?)
und er solange an der Macht bleiben will wie moeglich.
Von Nachhaltigkeit in Venezuela keine Spur.
Ach, Mensch...diese Eurokinder mit dem Che-Guevara-Poster an der Wand und die Euros in der Tasche!
Heutzutage wird mehr geklaut als je zuvor, die Kriminalitaet ist VIEL VIEL schlimmer, als was wir frueher hatten und die, die sterben, sind keine Reichen, es sind arme Leute, wie meine Verwandte. Wieso kann das sein, wenn wir jetzt mehr Gerechtigkeit haben sollen?
Du hattest keine Ahnung von Venezuela vor Chavez. Er kam an die Macht und siehe, da kommen die Eurokinder und interessieren sich fuer mein Land und lesen, was sie lesen wollen,
machen vielleicht eine Reise im Rahmen eines pseudosozialistischen Kongresses und glauben alles, was die Chavistas ihnen sagen.
Und sie sagen (ganz einfach): die, die gegen Chavez sind, sind lauter Bushbefuerwoerter, "reiche Weissen", die die anderen bis jetzt ausgebeutet haben.
Ihr seht die Welt in zwei Farben und Ihr glaubt, dass man nur zwei Positionen haben koennt: die von Chavez-Che-Guevara-und-die-coolen-Eurokinder-
die-besser-wissen und die Reichen, die fuer Bush und die Rechtsradikalen stehen.
So einfach ist Eure Welt.
Ja, man kauft nun mehr als 1998. Aber:
das Land ist viel weiter entfernt von einem nachhaltigen Entwicklung als je zuvor, Korruption ist schlimmer geworden und die Leuten werden zu Bettlern.
Ich bin nicht reich, meine Familie noch weniger.
Wir werden, wie viele andere, schickaniert, weil wir nicht an Chavez glauben.
Tausende von Menschen muessen zu Chavez-Demostration gehen, wenn sie weiterhin
ihren Job beim Staat behalten wollen.
Ueberall muessen Beamten rote Hemde und rotes Zeug tragen, es sei denn, sie wollen ihren Job verlieren.
Chavez sagt, er haette den Analphabetismus ausradiert, wenn das nicht stimmt.
Ihr denkt, Chavez hatte kostenlose Ausbildung eingefuehrt, wenn schon meine Eltern, so wie fast alle, die ich kenne, das bekommen hatten und sie extrem arm waren.
Ich habe immer gegen alle vorigen Regierungen
protestiert, ging auf die Strasse, waehlte eine sozialgerichtete Partei (nie aber Chavez-Parteien). Nun sehe ich, wie eine Truppe
von Schwindlern sich als "Sozialisten" portraetieren, das Land weiter (denn das gab es zuvor) pluendern, ihre Macht verewigen wollen
und das alles im Namen des Sozialismus.
http://desarrollosostenibleparav...lidad-
sick.html
Tja, weiter Che-Guevaras-T-shirt tragen und
die Euros geniessen.
Warum kommst Du nicht definitiv zu uns?
Und bitte: nicht beim Staat einen Chavistajob haben, sondern als eine normale Buergerin und versuch, ganz ehrlich zu arbeiten und so zu ueberleben.
Kleine Frage:
Kepler--I am willing to engage in a discussion of legitimate complaints and concerns about Chavez. However, trying to deny Chavez' real accomplishments is disingenuous and self-defeating. Better you talk about crime and your personal experiences having to attend Chavez marches...
What is a shortage? Food consumption is way up. So clearly there is not a "shortage" of food being consumed. I know in Honduras the grocery stores in the capital are well stocked. No one talked about "shortages", yet there were lots of people who weren't getting enough to eat. And if you look just at the famous "supply and demand" there is no shortage of health care in the U.S. Anyone who has money can get healthcare. yet millions don' thave it You should think about what these things mean. It may be that monetary demand is often different from real demand (what people want and/or need)You keep coming back to the same arguement time and time again. I believe Tor explained this to you quite well last time. Do you not agree with it, or do you just choose to ignore it?
Kepler - damit die anderen Blogger deine Scheisse verstehen koennen, weare es nicht besser und hoeflicher auf englisch zu schreiben?
Du wiederholst dieselben Argumente, die Du immer verteidigt hast und mit denselben Luegen.
Guys - I'm just asking Kepler not to be an ass and write in English. This is a fucking blog not the Tower of Babel.
Rubén
PD - Great post OW. Anyone can pick holes in abything but you arguments are spot on and illustrate that the NYT BS is just that - BS proaganda just to foll the ignoramuses in the US.
"I believe Tor explained this to you quite well last time. Do you not agree with it, or do you just choose to ignore it?"
If I recall correctly Tor never responded to it, for whatever reason. Neither did Sire. Instead he focuses on economics jargon instead of stopping to think which is more important - having store shelves always fully stocked so that those fortunate enough to have plenty of money can always get what they want when they want it, or having the level of consumption of the entire population go up.
What I'm really questioning is the value of these economic formulations where you even constitute "demand" if you have money. Under those formulations lots of people could starve to death yet there wouldn't be any economic problems - people not having money to by life sustaining products doesn't constitute a shortage in that formulation.
I suspect this raises uncomfortable questions for which they don't have any answers - which is why it is constantly avoided or danced around not just by some on this blog but by main stream media, economics as presently taught in most countries, etc.
The issue is complicated, yes the government deserves credit for giving the people more food, but it also deserves the blame for not giving all they want (lets face it if someone is starving in Venezuela it has nothing to do with stocked shelves of a select item of goods, but with income poverty). The shelves just represent the fact that we are not there yet, we are still a developing nation.
Granted the opposition and the MSM is completely blind on the first issue, but the people are not and that is why both will remain baffled he keeps winning elections, but still... the government is to be held (and should IMHO) to the highest standard possible.
You're just evading...and being incoherent by using "econoimc jargon" when it fits you and denouncing it where it does not.
The solutions are not price caps as this creates shortages. If you want to prevent hunger better give the poor allowances for it or (if absolutely necessary) subsidise it. Price controls are simply an inadequate instrument.
"The solutions are not price caps as this creates shortages"
Sure, as a by product of increasing consumption. Goods fly off the shelves and food consumption was up 10 or 16% last year depending on who you listen to and is going up another 8% this year. So the reality is there is less of any sort of shortage this year then in previous years. True shortages are when people aren't able to consume things they need - not when things disappear from store shelves quickly.
Your suggestions are other alternative ways to go about this. But they have their drawbacks too. Give people "allowances" and there is no guarentee it will be used for the intended purpose. Witness what happens with food stamps in the U.S.
And subsidize food production? In Venezuela where most production is by oligopolies that have little competition that will just pad the profit margins of big producers. Again not the desired effect.
There is no perfect solution that doesn't have drawbacks. But clearly the one being persued by Chavez is working well.
If I recall correctly Tor never responded to it, for whatever reason. Neither did Sire. Instead he focuses on economics jargon instead of stopping to think which is more important - having store shelves always fully stocked so that those fortunate enough to have plenty of money can always get what they want when they want it, or having the level of consumption of the entire population go up.Actually, Tor had a very good response to that very question, to which you never replied. Here it is again in case you missed it:
Some of the poor buyers are priced out of the market. They are simply too poor to afford the food that is available in the supermarkets. Society 'wants' more food i.e. there is a shortage of people consuming food (based on a normative or subjective standard), but there is no shortage by my definition at the market price.
Lets push this further. By your 'definition' there is a shortage of everything. Well...everyone would 'want' a penthouse, a sailboat and a BMW. So there is a shortage by this defintion. Naturally there is no shortage at the current price.
Yes, food is different, but then you have to argue that food is special because it is a basic need - unlike sailboats. This is true, but how do you solve the tragic problem in Honduras? Maybe the government decides that society is consuming too little food (and decides BMW-consumption is irrelevant). How should it design policites to boost consumption and overcome to food-deficit?
Price controls? Ask the USSR how that works.....or just look at Venezuelan history. Or should you encourage competition (to lower prices), try to stimulate economic growth (so the poor gain more money) or even cut VAT on food products (and tax alcohol say) or do a food stamp type program/subsidy targeted at the poor?
Tor | 03.13.07 - 3:15 am | #
excuse me OW, but as you see in the graphic, the decreace of the inflation comes from 1996, at the time a number of economical policies were taken by the government of Caldera. Just a comment.
excuse me OW, but as you see in the graphic, the decreace of the inflation comes from 1996, at the time a number of economical policies were taken by the government of Caldera. Just a comment.To add to that, inflation is about the same as when Chavez took office ~8 years ago.
Wonderfull so crime is dropping too from previous peaks, should we celebrate? Caldera implemented Agenda at around 1996 yet he even failed at killing inflation wich is the ONLY thing neo-liberalism is competent about.
Anyhow inflation for 06 was 17% lower than 99 just that the opo loves to find the worst numbers available to make a weird point.
"To add to that, inflation is about the same as when Chavez took office ~8 years ago."
Yes, but economic growth, which was about negative 6% then is now a posotive 10%. Economic growth is far more important than inflation so Chavez has clearly changed the Venezuelan economy for the better.
"excuse me OW, but as you see in the graphic, the decreace of the inflation comes from 1996, at the time a number of economical policies were taken by the government of Caldera. Just a comment."
Just a comment Pedro but wasn't it the Caldera government that sent Venezuelan inflation over 100%.
BTW, I don't think much of their inflation fighting methods. One was to just stop paying public employees their full salaries. THat is why the Chavez administration inherited about $6 billion dollars in unpaid back wages. I guess you can't have inflation when you aren't paying people their money to begin with.
Further, the Caldera government put Venezuela into a recession (another little present they left for Chavez). Chavez has high growth and high inflation. That is somewhat understandable. Caldera had low growth and high inflation. That takes true incompetance to pull off. Thank god Petkoff is just editing a newspaper and not running government economic policy anymore.
Anon,
Thanks for posting that - I must have missed it.
"Some of the poor buyers are priced out of the market. They are simply too poor to afford the food that is available in the supermarkets. Society 'wants' more food i.e. there is a shortage of people consuming food (based on a normative or subjective standard), but there is no shortage by my definition at the market price. "
Indeed, the poor are prices out of many things. That Tor then says that there is no shortage of those things by his definition again points up to me there is a problem with his definition. By my definition if there are people who are not getting enough to eat or who are not getting enough medical care then there is a shortage of those things.
"Lets push this further. By your 'definition' there is a shortage of everything. "
Indeed, but I only care about things that are considered necessities, not wants. So I'm talking about things like food, medical and housing.
"How should it design policites to boost consumption and overcome to food-deficit?
Price controls? Ask the USSR how that works.....or just look at Venezuelan history. Or should you encourage competition (to lower prices), try to stimulate economic growth (so the poor gain more money) or even cut VAT on food products (and tax alcohol say) or do a food stamp type program/subsidy targeted at the poor?"
The Soviet Unions problems weren't price controls. In the Soviet Union you had a completely command economy, which is not what Venezuela has. So Venezuela and the Soviet Union are not comparable.
"Or should you encourage competition (to lower prices),"
Not a bad idea but I can imagine all the screaming that will be coming from the opposition, the US State Department, and the Washington Post editorial page if Chavez were to take steps to break up the oligopolies like the US did with Ma Bell or Standard Oil.
"try to stimulate economic growth (so the poor gain more money) or even cut VAT on food products (and tax alcohol say)"
That has already been done and is working 
The fact that Social Class E has seen its real income more than double has helped matters, I'm sure. Problem is, that is part of why food flies of the shelves so quickly, people can now buy it, and the opposition gets all worked up about apparent "shortages".
"do a food stamp type program/subsidy targeted at the poor?"
This is a good idea. Problem is it is very vulnerable to corruption as it has been in the US. In Venezuela it would likely be worse. So Venezuela has taken the alternative approach of running its own food stores and lowering prices.
- "True shortages are when people aren't able to consume things they need - not when things disappear from store shelves quickly."
That's not the situation we are referring to. We refer to shortage as a disequilibrium in the market, generated by excess demand and insufficient supply.
- "Your suggestions are other alternative ways to go about this. But they have their drawbacks too."
Yes, in a world of second best that is almost always the case. But these drawbacks are *a lot less* serious than price controls.
- "Give people "allowances" and there is no guarantee it will be used for the intended purpose. Witness what happens with food stamps in the U.S."
There are always trade-offs. However, this solution targets quite well a group which is additionally reduced in scale. Chances are that if people really cannot afford food they will actually use them as intended.
- "And subsidize food production? I"
Actually, I was referring to subsidising food consumption (à la Mercal). It is though preferable to have a system of allowances which is much less intrusive and distortionary
- "There is no perfect solution that doesn't have drawbacks. But clearly the one being persued by Chavez is working well."
Price controls working well and having not a lot of undesired effects? You must be joking..
Vergación, vivir en nuevayor si es sabroso.
"desde una mesa repleta cualquiera decide aplaudir/la caravana en harapos de todos los pobres"
"Social Class E has seen its real income more than double has helped matters, I'm sure."
Still, remember that food inflation has been higher than general inflation.
"Social Class E has seen its real income more than double has helped matters, I'm sure."
Still, remember that food inflation has been higher than general inflation.
Sire | 03.25.07 - 9:54 am | #
And 344,000 thousand autos were sold in 2006.
My comment is about as relevant as yours, Sire. You just got to,learn to eat crow instead of slithering around in spurious arguments.
Rubén
And 344,000 thousand autos were sold in 2006.Something tells me Social Class E wasn't buying many of those 344.000 autos.
Coherence has never been Rubén's best friend
"That's not the situation we are referring to. We refer to shortage as a disequilibrium in the market, generated by excess demand and insufficient supply."
Then you are referring to something that to me is irrelevant. What matters is how much food people are consuming. This also makes your term "insufficient supply" raher meaningless. The supply now is much greater than before.
"However, this solution targets quite well a group which is additionally reduced in scale. Chances are that if people really cannot afford food they will actually use them as intended. "
The problem is it is difficult to limit it to only those who are really the intended target. It takes a lot of bureaucracy to go around and try to verify peoples income.
"Actually, I was referring to subsidising food consumption (à la Mercal)."
ok, they are doing that.
"Price controls working well and having not a lot of undesired effects? You must be joking.."
I didn't say they weren't having some undesireable effects. They are having some, like not stimulating new investment. But clearly they are working as intended - food consumption is way up.
OW,
You are trying to redefine the term "shortage". Simply put, it's when you have the money to buy something but cannot find it in a store. You keep coming back to the same arguement that consumption is up. Stop and think about it for a second: what if Venezuela was producing more food instead of less? What if we didn't have the shortages of caraotas, meat, sugar, etc? How much could have consumption increased if it weren't for these shortages?
"Simply put, it's when you have the money to buy something but cannot find it in a store"
Exactly, and under this definition people who don't have money don't count. That is why millions of people can starve in some countries while no one speaks of shortage or millions in the U.S. don't get healthcare yet it is never revered to as a shortage. Leaving the market to allocate things by who has money may be acceptable for many things but, in most peoples views, not for necessities. That is precisely the problem that the Venezuelan government is working to resolve. Thanks for finally making very clear the difference in the value system which only care about money and one, such as Chavez's, which cares about people.
"What if we didn't have the shortages of caraotas, meat, sugar, etc? How much could have consumption increased if it weren't for these shortages?"
You have this backwards - Venezuela appears to have shortages because people are consuming more. It is because peoples consumption of food has gone up so much that there sometimes appear to be shortages. But of course, there really isn't a shortage - food is more plentiful. Making food more plentiful and having people consume more is what the government should be aiming for and they have succeeded.
- "Then you are referring to something that to me is irrelevant. What matters is how much food people are consuming. This also makes your term "insufficient supply" rather meaningless. The supply now is much greater than before. "
Again, you've evading. We refer to shortage as a disequilibrium in the market, generated by excess demand and insufficient supply.
For most people it's not "irrelevant" whether there is meat, sugar, etc. available in the supermarkets.
How much food people can consume ultimately depends on supply. Therefore, if there are shortages, they will also be able to consume less, or not their desired food.
- "The problem is it is difficult to limit it to only those who are really the intended target. It takes a lot of bureaucracy to go around and try to verify peoples income."
As said, in a world of second best, it is still the least intrusive and most targeted solution available.
- "I didn't say they weren't having some undesirable effects. They are having some, like not stimulating new investment. But clearly they are working as intended - food consumption is way up."
It's by far the "solution" which "works" worst. They, inter alia, distort the whole economy, prevent investment, create shortages and subsidise indiscriminately.
- "You have this backwards - Venezuela appears to have shortages because people are consuming more."
Again, wrong. The shortages are a consequence of price controls, cf. microeconomics 101. If the economy were working that well, without price regulation distortion, supply and demand would have adjusted, preventing shortages.
"generated by excess demand "
In this case what is "excess" demand - that poor people can now eat better?!?!
"For most people it's not "irrelevant" whether there is meat, sugar, etc. available in the supermarkets. "
For most poeple what is rellevant is how much they consume. Consumption is way up and people are happy about it.
"Therefore, if there are shortages, they will also be able to consume less, or not their desired food. "
Lets back up here and remember, there is not less food being supplied, there is more. Repeating, supply has gone way up, not down. If these "shortages" were from reduced supply, then indeed that would be a problem. But supply is up and consumption is up so that is not a problem. It may be helpful for you to refer back to the Datanalysis quote:
A pesar de la pronunciada escasez o ausencia de algunos productos de la dieta diaria, registrada en los meses de enero y febrero pasados, el consumo no se vio afectado y, muy por el contrario, se mantuvo en alza.
"If the economy were working that well, without price regulation distortion, supply and demand would have adjusted, preventing shortages."
The goal isn't to prevent "shortages". It is to boost consumption. And that is working.
"supply and demand would have adjusted"
Sure. Supply meets in Honduras and half the country doesn't get enough to eat. Supply meets deman for healthcare in the U.S. but tens of millions can't get health care. Clearly supply and demand don't effectively work to resolve some important problems.
BTW, Sire, on subsidies even the Chavez government tried them in one realm and they didn't work. Remember how they started giving people money (about $8,000) to spend towards housing? In theory that should have helped create more housing and even I was for it at first.
But it didn't work that way. More private sector housing wasn't really created, or wasn't created in important parts of the country like Caracas, so what this subsidy had the effect of doing was boosting housing prices. Houses now just cost more. So rather than help people get homes and help reduce a housing shortage what this subsidy mainly did was enrich current real estate owners by boosting prices and boosting the value of their holdings. Definitely an undesired outcome.
In food it would be likely the same. Venezuela doesn't have competative markets, it has monopolies and oligopolies. In many cases the single best cure would be more competition - ie in some respects Venezuela needs MORE capitalism. But to get that the Venezuelan govenrment would have to take measures that would be certain to be fought tooth and nail even to the point of trying to overthrow the government. And did I mention, some of the oligopolies happen to only national TV networks and would probably be calling on everyone to march on Miraflores again.
Personally, I think Chavez should go after some of those oligopolies now that he is so strong politically. But given that the last time he went after such powerful vested interests it nearly cost him his government I'm not surprised he doesn't.
OW--You hit on a huge world problem: monopolies and oligopolies. That is exactly where the much heralded new world order is headed. These mega-multinationals preach capitalism, while esposing market domination. Wal-Mart is a perfect example. They prey on small suppliers who compete intensely with each other. They bust any attempt at unionization. And they sell to consumers who have no organizing power whatsoever.
And if you look at the Fortune 500, virtually every one of the companies have come to dominate some major market, often several, sometime together with a handful of like minded companies.
You're right, what we need is a little capitalism...
Again, you're using "economics" where it fits you, you're questioning this approach where it does not. For competition it fits you, for explaining shortages it's "invalid".
- "If these "shortages" were from reduced supply, then indeed that would be a problem. "
They are from reduced supply. At regulated prices, the desired product will be undersupplied (excess demand and insufficient supply)
- "Clearly supply and demand don't effectively work to resolve some important problems."
Yes, that's why I suggested allowances. Price controls have never been a working "solution" to it and will never be.
- "Remember how they started giving people money (about $8,000) to spend towards housing? In theory that should have helped create more housing and even I was for it at first."
Do you know why it did not? Due to uncertainty about property rights!
Sire - you are so full of lies and disinformation. The subsidies given to people wanting to buy houses was based on the Ley de Politica Habitacional which guaranteed a lower interest rate and was financed by the government via the private banks.
Depending on your income you would receive a certain amount of subsidy - up to Bs. 21 million.
The banksbwere obliged by law to dedicate 17% of their mortgage portfolios to this scheme and they were all sold out during the past 2 years. If you wanted a commercial mortgage from Banco Mercantil, they were chrarging 35% last year - usury in myt book and deserved to be nationalized for this enslavement policy on mortgages.
There's is no doubt about individual property rights - in fact Chavez just said so on Aló Presidente ten minutes ago. However, if you have 2 homes, the one you do not live in or do not declare as your main residence, expect a heavy tax hit on this in the future.
I fthere is any doubt it's due to the campaign in the private media scaring and disociating people about private individual property rights. And I guess you support that straetegy to scare peoplee into thinking that their home will be taken away from them or they hqave to allow poor families to sharte with them.
It's just black propaganda which has not worked except in a few cases such as your self.
Honestly, you write soime acceptable stuff at times but now and again you slip into the world of BS.
Rubén
If my memory does not fail me, construction has been up for some time now.
The problem is, for example, is that there is less incentive for real estate proprietaries to let apartments if after a certain time the tenants get a right to buyout. That can be seen if you analyse the percentage of apartments available for rent in Caracas which has gone down substantially.
"They are from reduced supply"
Popycock. Supply was up between 10 and 16% last year alone and is going up another 8% this year.
" Again, you're using "economics" where it fits you, you're questioning this approach where it does not. For competition it fits you, for explaining shortages it's "invalid". "
Indeed I am. But that is not a matter of where it "fits me". It is a matter of where it works and where it doesn't. For some things market forces work well and generate a lot of wealth. However, they are not good at ensureing that basic needs are met across the population. That is why most nations don't rely on market forces alone to meet their peoples needs. An obvious example is socialized medicine which is used by many (most?) countries to meet the health needs of their population.
Just as Venezuela is being accused (falsley) of having shortages of food one could accuse Canada of having a "shortage" of health care because people often have to wait to get it. However, others would point out that in reality Venezuela and Canada are better served because MORE people in those countries are having basic and important needs met by having the government intervene and overrule the marketplace and leaving so many needs unmet as some other countries chose to do.
ow, they are because of reduced supply:
- domestic agricultural production was down
- due to regulated prices there was excessive demand and insufficient supply of sugar, beef, etc.
"obvious example is socialized medicine which is used by many (most?) countries to meet the health needs of their population."
The point is that they do NOT so by imposing hugely damaging price caps!
"Just as Venezuela is being accused (falsley) of having shortages of food"
So the empty shelves are just imaginary?
" ow, they are because of reduced supply:
- domestic agricultural production was down
- due to regulated prices there was excessive demand and insufficient supply of sugar, beef, etc. "
Supply is way up as Venezuela imports a lot of its food and that has increased.
"The point is that they do NOT so by imposing hugely damaging price caps! "
Actually, in the case of Canada I think they do it by banning most private medicine - that sure does make price caps irrelevant. The equivalent for this discussion would be if Venezuela took over all farms and supermarkets. I'm not in favor of going that far.
"So the empty shelves are just imaginary? "
Again, you are focusing on the wrong metric. Peoples stomachs are fuller In fact, if you want to know where the beef is in Venezuela its in someones stomach in Petare or Antimano or Macuto as it was eaten!
Sire - there's no food shortage in Venezuela. Sudden shortages of milk and otehr products were engineered by hoarders wanting to push up the price.
Your posts about empty shelves are just cheap propaganda as was you jibe about uncertainty about private property. Media myths. One shot of empty shelves in a Mercal and there's a food shortage. It's just because people are buying more.
In fact as OW knows, there were 4 million less buyers in Mercal in 2006 but Mercal sold more food in terms of volume. Conclusion: individuals and families were buying more and the people who went to other places to buy food did so since they had more money.
Price controls in Venezuela are vital. Cartels and speuclation and hoarding abound to fleece the public, so market forces are negated to create fair prices.
With the mew laws on hoarding and speculation, I'm just waiting for the first people to be jailed for 5 years as an example to others thinkin about carrying out these crimes.
Rubén
BTW - my comment about the 340,000 vehicles was maent to be absurd just to illustrate the absurdity of you comment previous to that one. My, you are thick at times or suffer from acute sense of humor failure.
BTW, the Times tipped their cards on Venezuela some time ago:
http://
dagenschavez.blogspot.com...militrkupp.html
New York Times, April 13, 2002
Hugo Chávez Departs
With yesterday's resignation of President Hugo Chávez, Venezuelan democracy is no longer threatened by a would-be dictator. Mr. Chávez, a ruinous demagogue, stepped down after the military intervened and handed power to a respected business leader, Pedro Carmona. But democracy has not yet been restored, and won't be until a new president is elected. That vote has been scheduled for next spring, with new Congressional elections to be held by this December. The prompt announcement of a timetable is welcome, but a year seems rather long to wait for a legitimately elected president.
Washington has a strong stake in Venezuela's recovery. Caracas now provides 15 percent of American oil imports, and with sounder policies could provide more. A stable, democratic Venezuela could help anchor a troubled region where Colombia faces expanded guerrilla warfare, Peru is seeing a rebirth of terrorism and Argentina struggles with a devastating economic crisis. Wisely, Washington never publicly demonized Mr. Chávez, denying him the role of nationalist martyr. Rightly, his removal was a purely Venezuelan affair.
Public faith in Venezuela's institutions began eroding well before Mr. Chávez burst on the scene with a failed 1992 coup. Corruption discredited both main parties, and a patronage-fueled bureaucracy devoured the country's abundant oil revenues, leaving many Venezuelans desperately poor. Mr. Chávez was elected president in 1998 promising change he never delivered. He courted Fidel Castro and Saddam Hussein, battled the media and alienated virtually every constituency from middle-class professionals, academics and business leaders to union members and the Roman Catholic Church.
This week's crisis began with a general strike against replacing professional managers at the state oil company with political cronies. It took a grave turn Thursday when armed Chávez supporters fired on peaceful strikers, killing at least 14 and injuring hundreds. Mr. Chávez's response was characteristic. He forced five private television stations off the air for showing pictures of the massacre. Early yesterday he was compelled to resign by military commanders unwilling to order their troops to fire on fellow Venezuelans to keep him in power. He is being held at a military base and may face charges in Thursday's killings.
New presidential elections should be held this year, perhaps at the same time the new Congress is chosen. Some time is needed for plausible national leaders to emerge and parties to reorganize. But Venezuela urgently needs a leader with a strong democratic mandate to clean up the mess, encourage entrepreneurial freedom and slim down and professionalize the bureaucracy.
One encouraging development has been the strong participation of middle-class ci
One encouraging development has been the strong participation of middle-class citizens in organizing opposition groups and street protests. Continued civic participation could help revitalize Venezuela's tired political parties and keep further military involvement to a minimum.
When given the chance to stand up for democracy the Times instead chose to stand up for access to more Venezuelan oil and "entrepreneurial freedom". Sad.
Hell, Communism has only killed 100 million people in less than 100 years (ten times more than organized religion has killed in 2,000 years)
Communism deserves another chance.
LOL. Like hell it does.
Pay no attention to those people starving in the street. They are just doing that to make our hero Chaves look bad.
ow,
thanks for the nyt reminder. i smell sulfur.
thanks for the good work. keeps many of us inspired.
klu-less and needs a mako-ver remind us that remaining armed is fun.
- "Sire - there's no food shortage in Venezuela. Sudden shortages of milk and otehr products were engineered by hoarders wanting to push up the price."
Nah, they did not want to sell it at the regulated price. That's why there are shortages in goods that are regulated. The accusation of hoarders is by itself the clearest proof shortages exist!
- "Your posts about empty shelves are just cheap propaganda as was you jibe about uncertainty about private property. Media myths. One shot of empty shelves in a Mercal and there's a food shortage. It's just because people are buying more."
Wrong again, as so many times said already. If the market plays, there will be no shortages, even if people buy more. The shortages concern just the products with price caps. Interesting, isn't it?
- "Price controls in Venezuela are vital. Cartels and speuclation and hoarding abound to fleece the public, so market forces are negated to create fair prices."
They don't work and are by no means vital. "Speculators" as you call them have an important role to play for resource allocation. Read about the financial markets for example
However, it's a lost cause arguing with you about economics. Ow manipulates it, while the others just don't want to see the obvious... sigh...
- "Again, you are focusing on the wrong metric."
No, you're. Or do you seriously want to contend that price controls do not lead to shortages? And no evading answer please, just a yes/no.
- "Supply is way up as Venezuela imports a lot of its food and that has increased."
Somehow the fall in domestic supply has to be made up for. But look, for imports Vzla will have to pay world market prices and domestic farmers will suffer from regulated prices. Now that's another unfair element of price controls.
Exactly, and under this definition people who don't have money don't count. That is why millions of people can starve in some countries while no one speaks of shortage or millions in the U.S. don't get healthcare yet it is never revered to as a shortage. Leaving the market to allocate things by who has money may be acceptable for many things but, in most peoples views, not for necessities.Back to this arguement again? I think Tor answered this one for you too. In a perfect world, it would be great if a government could provide perfect health to everyone for free. The fact is that will never happen as Tor pointed out before.
That is precisely the problem that the Venezuelan government is working to resolve. Thanks for finally making very clear the difference in the value system which only care about money and one, such as Chavez's, which cares about people.Spare me the ethics. Read Tor's past posts and try again. He described to it to you very clearly.
You have this backwards - Venezuela appears to have shortages because people are consuming more.This woud be partially correct if you removed the word "appears". Price controls have also played a part in the shortages, as well as "land reform".
It is because peoples consumption of food has gone up so much that there sometimes appear to be shortages. But of course, there really isn't a shortage - food is more plentiful. Making food more plentiful and having people consume more is what the government should be aiming for and they have succeeded.So while the rest of the world calls empty shelves a "shortage", you call it "increased consumption". That's a pretty clever spin.
Sire is right. You call out for economics only half of the time.
Its a good thing that food consumption has increased since this means that people are buying more food. Lowering prices makes things more affordable which causes demand to increase. Raising prices would do the opposite causing things to be less affordable thereby decreasing demand. Since food is an absolute necessity the government is doing the right thing by making food more affordable. The price of a good or service is far more important for a poor or middle class person than a wealthy person. Wealthy people have far more purchasing power than the poor and middle classes so price changes effect them very little. The elites like to keep prices high and wages low so they can keep the poor in poverty and destroy the middle class making them become poor also. A shortage of food would mean that demand for food is greater than the supply of food. There are only 2 ways to solve a shortage. The first way would be to lower demand for food, however this would cause a large percentage of the population to starve to death which any moral person wouldn't want. The other way which is the only moral solution is to increase the agricultural production of food and stop any hoarding of food by producers or retailers thereby creating enough supply to meet demand.
"Its a good thing that food consumption has increased since this means that people are buying more food. Lowering prices makes things more affordable which causes demand to increase. Raising prices would do the opposite causing things to be less affordable thereby decreasing demand. Since food is an absolute necessity the government is doing the right thing by making food more affordable."
Careful Ty. These may seem like perfectly obvious observations to you (and me) but they cause much consternation among some commenters here. So just watch your back if you are going to say these types of things
"The fact is that will never happen as Tor pointed out before."
I didn't notice him pointint out how that will never happen. In any case it does seem to happen, or very nearly happen, in Canada. So it sure seems doable.
"Spare me the ethics"
No, I won't spare them. They are exactly why Canada has socialized medicine, most European countries have large social welfare systems, and why Chavez is doing things to make food more available to people. The reason for not leaving everything to the market is ethics. Of course, not everyone cares about that - many care more solely about their own personal well being.
"So while the rest of the world calls empty shelves a "shortage", you call it "increased consumption". That's a pretty clever spin."
I thought it was reality. Or are you denying that food consumption is up?
"No, you're. Or do you seriously want to contend that price controls do not lead to shortages? And no evading answer please, just a yes/no. "
Sometimes they do, sometimes they don't. Depends how they are administered. In Venezuela's case they obviously haven't.
Question Sire. If there are all these "shortages" - how did food consumption grow so much last year?
- "Sometimes they do, sometimes they don't. Depends how they are administered. In Venezuela's case they obviously haven't."
The HAVE. How about the coffee, sugar, beef, etc? What's more, how come the shortages concern just the regulated prices? If there had been no shortages, why the ridiculous campaign against hoarders?
Now, please show me in the economic equilibrium model how price controls can be established without causing shortages (naturally assuming the controlled prices are lower than the equilibrium price). If you can show me this, I will happily believe you that they can be implemented 'successfully'.
- "Question Sire. If there are all these "shortages" - how did food consumption grow so much last year?"
Shortages just concern a few, but not all products. What's more, there are substitutes for the goods with shortages. Finally, imports have made up also for the lower production.
"Now, please show me in the economic equilibrium model how price controls can be established without causing shortages (naturally assuming the controlled prices are lower than the equilibrium price). If you can show me this, I will happily believe you that they can be implemented 'successfully'. "
Ok, but its a little long so it has to wait until tonight
I always find it amusing that the MSM still refuses to publish the email addresses of its reporters and/or that they never allow comments to be posted on their articles. It must be hard for these media giants to be called out for their selective fact farming!
Perhaps the NYT thinks the public is just too dumb or gullible to belive other than what they feel is "fit to print". This is precisely why the MSM is dying a quick death and the alternative online press is in it ascendancy.
NYT, RIP.
I didn't notice him pointint out how that will never happen. In any case it does seem to happen, or very nearly happen, in Canada. So it sure seems doable.He didn't say that it would never happen, but pointed out how one is limited by price, and the other by lines. Trying to emulate Canada will be extremely difficult, as Canada is far more developed, has a relatively stable economy, and has the added benefit of oil.
No, I won't spare them. They are exactly why Canada has socialized medicine, most European countries have large social welfare systems, and why Chavez is doing things to make food more available to people. The reason for not leaving everything to the market is ethics. Of course, not everyone cares about that - many care more solely about their own personal well being.Read Tor's post and then try again.
But since you want to play the ethics card, when you're done reading Tor's post answer me this: Is it worth having a hefty medical bill to have immediate and possibly life saving surgery, or would you rather wait in line, and possibly die for your turn to have surgery?
I thought it was reality. Or are you denying that food consumption is up?Back to the same arguement I see. Yes, consumption is up like you and I have said already. The difference is you're trying to use higher consumption as an excuse for failed government policies in regards to food production.
"Trying to emulate Canada will be extremely difficult, as Canada is far more developed, has a relatively stable economy, and has the added benefit of oil."
Venezuela can't do all that Canada can for those reasons. But it still can do a lot and it is.
"Read Tor's post and then try again."
Read it but don't know what you are referring to. If you have a point to make, maket it.
"Is it worth having a hefty medical bill to have immediate and possibly life saving surgery, or would you rather wait in line, and possibly die for your turn to have surgery?"
Two parts to this: a) it is very unlikely that you will wait in line until you die - they use the basic concept of triaging so that those who most need the procedure get moved to the top of the waiting list. Medical necessity dictates who gets care, not money. b) sure if you have the money. But many people don't have the money and would be left to die. Hospitals are not required to provide this care (generally they are only forced to care for you if you have a contagious desease or if you come in with trauma they may have to stabalize you). If you have cancer or heart failure they are under no obligation to treat you and the vast majority of hospitals in the U.S. won't unless you can show them you can pay.
No one keeps statistics on how many people die in the U.S. due to inability to afford medical care. But the number is certainly high. About two months ago the Wall Street Journal had an excellent in depth article (front page) about this problem and they went into great detail on the case of a women who had lupus, couldn't access the health care system much of the time, and died a really horrible death. If you have access to a good library you might want to look it up (pretty sure it was in January).
If you're citing the WSJ, did you read the too the article about donor kidney allocation reform?
It illustrated very well what problems/dilemmas judging just from medical necessity can arise.
"The difference is you're trying to use higher consumption as an excuse for failed government policies in regards to food production."
Its not an excuse. Its just that I like "failed" policies that lead to higher consumption.
Nope. Can you tell us what it said?
Cool, found the article about the woman with Lupus on a free site:
http://www.post-gazette.com/pg/0...9/743713-
84.stm
Venezuela can't do all that Canada can for those reasons. But it still can do a lot and it is.I think you mean Cuba. Chavez has done little to improve the Venezuelan health care system. The Cuban doctors are a nice bandaid, but something more substantial needs to be done.
Two parts to this: a) it is very unlikely that you will wait in line until you die - they use the basic concept of triaging so that those who most need the procedure get moved to the top of the waiting list. Medical necessity dictates who gets care, not money.And what happens when there is a line of people needing the same surgery? The stories of delayed cancer treatments are far and wide. I suggest you look them up. The fact is, there are very sad stories on both sides. The question is, which is better? You obviously think that socialized medicine is better. For developing countries like Venezuela, it would be good to have it at a lower level for those people who cannot afford premium service. However I don't see it working in a place like the US. The second question is, what will happen to the socialized medicine programs in Venezuela if the price of oil dips? Medicine and health care is expensive, and I can see it being the first thing to have cuts.
b) sure if you have the money. But many people don't have the money and would be left to die. Hospitals are not required to provide this care (generally they are only forced to care for you if you have a contagious desease or if you come in with trauma they may have to stabalize you). If you have cancer or heart failure they are under no obligation to treat you and the vast majority of hospitals in the U.S. won't unless you can show them you can pay.Hospitals in the US cannot deny ER patients. If someone shows up in the ER with a life threatening problem they have to be treated. It's the law. That being said, it is possible that they will try to be released earlier than other patients as they are a debt. What health care provides is primary care. With primary care, some of these health problems can be avoided.
No one keeps statistics on how many people die in the U.S. due to inability to afford medical care. But the number is certainly high. About two months ago the Wall Street Journal had an excellent in depth article (front page) about this problem and they went into great detail on the case of a women who had lupus, couldn't access the health care system much of the time, and died a really horrible death. If you have access to a good library you might want to look it up (pretty sure it was in January).Where are the numbers of people who die waiting for surgeries? Do you think their cause of death is "waiting in a line", or is it documented as heart failure, cancer, etc?
Its not an excuse. Its just that I like "failed" policies that lead to higher consumption.Again, you're using hig
The most subsidized economy in the world is the USA's. Just look at the "defense" budget for next year--$650Billion. Total subsideies are over 20% of GDP--almost $4Trillion. Since the 1820s, the "American System" is Corporatist, or Corporate Socialism. The so-called "free market" is propaganda--total BS.
The NY Times would be a much better newspaper if it concentrated on educating its readership about the ethnic cleansing gang war going on in Los Angeles http://observer.guardian.co.uk/
w...2036580,00.html and the litany of crimes committed by the US Government for the last 30+ years. But being the Imperial Tabloid it doesn't. It might even focus on the miriad ways the US Government distorts economic indicators to provide the rosiest of pictures. Think about this for a moment: If the economy is at "full employment," then why are so many people unable to make their house payments, supposedly causing the "sub-prime crisis"? Or what about the massive corruption on Wall Street recently documented by Bloomberg http://www.youtube.com/watch?v=7...h?
v=7fcre8P2UUY and as confessed by Jim Cramer of CNBChttp://www.commondreams.org/views07/0321-
30.htm ?
As far as I'm concerned, the NY Times has absolutely no credibility when it comes to criticing any other country's economy or economic decisions, considering the wholesale state of dysfunction in the US economy and federal government.
It's a chore to read Tor and Sires' posts, as they simply regurgitate high-school level economic ideology and just refuse to understand that supply hasn't reduced but merely has met the level of consumption. Why is this so hard to understand??
It would also be useful to look at changes in population levels ..
"And what happens when there is a line of people needing the same surgery? The stories of delayed cancer treatments are far and wide. I suggest you look them up. The fact is, there are very sad stories on both sides. "
This is getting silly. Now you are just making things up. Statistically people who have accessed to socialized medicine live longer.
And actually, this goes for pretty much your whole comment. This is a fact based blog so unless you are going to base your arguements on FACTS there isn't much point to this.
- "Nope. Can you tell us what it said?"
http://online.wsj.com/article/SB...ON=wsjie/
6month
We're still waiting for your economic model, btw
Sire,
I’m not giving a new economic model. I’m explaining how under the existing one price controls can often work and not create shortages, if administered properly.
First, the supply and demand curves used to give equilibrium prices and supplies are accurate MODEL, but that model is a simplification and is often deviated from in reality. One of the biggest simplifying assumptions in that model is that supply and demand can react immediately to changes. But that is not true in reality for a variety of reasons – new companies can’t just get into a business right away it takes time, new factories take time to build, etc. etc.
The supply and demand curve model predict that if prices are artificially forced down (from price controls in this case) supply will drop. Over time and in a perfect market that is true. But supply won’t necessarily drop for significant amount of time – even years. To show why I’m going to take an extreme example of where prices go down so low that a company starts losing money and show how the company will often be better not stopping/reducing production.
That probably seems very counterintuitive, but it is true. To understand why you have to realize that companies have two kinds of costs when they produce something – fixed costs and variable costs. Fixed costs are things like the cost of the building where the factory is, the cost of the equipment they have, the cost of loans they took out and have to pay back – what these things all have in common is that they don’t vary with levels of production, they remain constant, and that is why they are called fixed costs. The important thing to remember is that the fixed costs remain unchanged even if the company scales back or completely stops production.
The second type of costs are variable costs. These are incremental costs that tend to vary in proportion to how much the company is producing. If you produce more you probably hire more workers so your labor costs go up. Conversely, if you stop production altogether then these costs disappear as you can layoff all the employees. Labor, raw materials, electricity, shipping, etc. are the types of things that are variable costs.
What does all this have to do with anything? Simple, it explains why companies will often keep up high rates of production even when they are losing money. Lets take an example to see why. Suppose we have a cereal factory. It sells about 100,000 boxes of cereal a year at $10 each for total revenue of $1,000,000. Lets suppose its fixed costs are $5 per box (or about $500,000 total) and variable costs are $4 per box ( about $400,000 total). The price the company gets is a dollar per box higher than its costs so it makes a profit of $1 per box or $100,000 total ($1,000,000 is $100,000 greater than total costs of $900,000). So far so good.
Along comes the government and says you can only charge $8 per box of cereal. So now the company is losing $1 per box (it is $9 to produce but they can only charge $
or $100,000 overall (they have $900,000 in costs but now only $800,000 in revenue). A lot of people think the company will immediately stop producing because it is losing money, which indeed it is. But it won’t stop production.
the smiley by the dollar sign is supposed to be eight dollars.
To see why suppose it did stop producing. It completely shut down and laid off all its workers, turned off the electricity in the plant, and stopped buying grain. So all its VARIABLE expenses go away. But it still has its FIXED expenses. That is it has annual fixed expenses of $500,000 (which it has even if it produces nothing) and now it has no revenue because it isn’t producing and selling anything. So now, instead of losing $100,000 per year, which is what it loses having full production with a price cap of $8 per box, now it would be losing $500,000 per year. So the company would screw itself if it stopped production in response to the price controls.
That is the key thing to remember on how companies decide whether to keep an existing operation running or shut it down. As long as it more than covers its fixed costs they will keep producing even if they are losing money in total because to shut down would make them lose even more money.
That is why price controls work and a downward shift in price won’t lead immediately to reduced production – even if the price controls reduce profits or, worse still, make the company run losses, they will often still find it better financially to keep producing. They might be pissed as hell about the controls, but they aren’t going to slit their own throat by just walking away from all their fixed costs (aka, investments) and lose everything.
Now, this also points up a few things about price controls
1) The government has to keep the prices within an appropriate range – once companies can’t even cover their fixed costs all bets are off.
2) This only works for the short or medium term. Obviously if a given market is unprofitable (or low profit) private companies won’t invest in it and existing producers will exit the market as their fixed costs are liquidated and over time supply will decline . Therefore the price controls do have to be lifted at some point, they can’t be used indefinitely or production really will go down.
3) There will be fake shortages with prices controls. Once prices are the result of negotiating with the government rather than market forces the producers will want to strengthen their negotiating position. One powerful way of doing this is to withhold products from the market in an attempt to create public pressure for the government to agree to higher prices. But of course, companies are losing money by doing that so if the government holds firm they will often capitulate and start selling their products again. We’ve seen lots of that in Venezuela.
4) This is a confiscatory method. In effect you are helping the consumer by forcing reduced profits on the producer or even losses. However, taxes are also confiscatory and they are accepted. If a company is forced to sell at a loss that is worse than taxes so that can be viewed as a problem. But given what most of these companies did in December 2002 most Venezuelans will probably be less than sympathetic to them.
ow, I see, you're basically referring to the famous example of a ski resort restaurant that keeps open in summer although it's incurring losses, but summer receipts are still welcome given the fixed costs present in summer as well.
It's worth pointing out that your proposals presuppose very much and some of them have to be relativised:
First, regarding the time lag – here I contend that effects of price controls can be quite immediate, and certainly won’t take years to materialise, for, inter alia, the following reasons:
- small country, open economy: many of the regulated products are imported (in fine, agricultural production was down while demand was up in 2006/7), thus their price depends on the world market price. Government price controls will not have any influence on this price. Countries will simply export somewhere else, rather than accept price controls. You can thus indeed face “immediate” shortages.
- also, Venezuelan producers live in an open economy: if it pays for them more to export their production than to sell it on the domestic market, they will simply export it, rather than sell it domestically. You can thus indeed face more “immediate” shortages.
- you underestimate the ingenuity of economic agents. Price and capital controls too, by the way, have a long history of being circumvented. Chances are then that un/lees profitable (read: price-regulated) products will indeed disappear from the shelves and in some manner show up differently, where prices are not regulated. You can thus indeed face relatively “immediate” shortages.
- no reasonable firm will incur losses for years. Moreover, most firms produce less than just one regulated product. It is then likely that they will just stop producing the unprofitable regulated product and continue with their other lines of production. Even if they produced just one regulated product, they are unlikely to maintain production just because not producing would let them make greater losses – in all probability, they would alter the product in such a manner as to circumvent the controls (vid. supra), or then switch production to a profitable product, which is also reasonable to assume as the specificity of investment for food production/processing is arguably not that high (eg a farmer can have sheep, cattle, hogs, etc without substantially changing his lands; also a slaughterhouse would be able to switch from one to another specie at a reasonable cost).
Secondly, there are important costs of price controls:
- the implementation and surveillance are expensive, require a large bureaucracy
- they lead to inefficient resource allocation in the economy, as prices no longer reflect economic fundamentals and send incorrect signals
- incentives for investment, innovation and hard work are diminished.
- If "producers will want to strengthen their negotiating position (and do) this by withholding products from the market in an attempt to create public pressure for the government to agree to higher prices."
Do you think then it's fair to put them in jail for doing so?
To sum up:
- price controls may indeed "work", but for a very limited time (certainly not years, maybe weeks or months), but impose very high costs on the economy [it's the same as with the money printing press: you can fool some of the people some of the time, but not all the people all of the time].
- given the cost benefit calculus and their likely ineffectivity, they are not the means of dealing with raising prices for alimentary goods. Better, more effective and less costly alternatives exist, as discussed earlier.
This is the biggest gripe about socialized medicine. It is very well documented.
This is getting silly. Now you are just making things up.
And actually, this goes for pretty much your whole comment. This is a fact based blog so unless you are going to base your arguements on FACTS there isn't much point to this.I presented them to you, and they are well documented. You can choose to read them or ignore them. I can't force you to.
The last part of one of my comments got clipped. Here it is again:
Again, you're using higher consumption as an excuse for empty shelves. You're comparing different government policies. Taking your logic further, lets say consumption was up 20% this year, but shelves were empty of staple foods for all but four months of the year. By your logic, this would still be a success and acceptable.
The fact is, when people can't buy staple foods, they don't thank the government. Most people aren't that utilitarian.
"This is the biggest gripe about socialized medicine. It is very well documented."
Here are some basic statistics.
http://www.medsch.wisc.edu/pnhp/...pnhp/
graph.html
Life expectancy is higher, infant mortality is lower, and costs are lower in countries with socialized medicine than in the U.S.
Those countries have more successful outcomes with particular diseases too, such as cancer, which I'm sure you can look up if you want.
"Taking your logic further, lets say consumption was up 20% this year, but shelves were empty of staple foods for all but four months of the year."
Are you making up a likely scenario?
Well actually maybe you are. It is kind of the situation they have with cars which you have to wait months to get - yet consumption of them is up 50% or so. And cars don't have price controls either!
"small country, open economy: many of the regulated products are imported "
I don't think this is true - or the importer is the government to sell at Mercal. Otherwise, yes, putting price controlls on imports would be self-defeating. But that is not what is happening.
"- also, Venezuelan producers live in an open economy: if it pays for them more to export their production than to sell it on the domestic market, they will simply export it, rather than sell it domestically."
Sure there could be problems with contraband. But I won't be large - it is hard to sneak a cow out of the country or even its meat which has to be refridgerated. This happens with gasoline too - but it isn't that large of a problem.
"Chances are then that un/lees profitable (read: price-regulated) products will indeed disappear from the shelves and in some manner show up differently, where prices are not regulated. You can thus indeed face relatively “immediate” shortages. "
This is the most serious of the problems that you have brought up and is a real threat to the effectiveness of the controls - the black market. Very tough enforcement is the key. Also, this problem also applies to one of the alternatives to price controls that even you brought up - subsidized stores. Note how things from Mercal have ended up being sold on the street.
"- no reasonable firm will incur losses for years."
I already said that
"Moreover, most firms produce less than just one regulated product. It is then likely that they will just stop producing the unprofitable regulated product and continue with their other lines of production. "
Yes, but all related items tend to be regulated, such as all cuts of beef.
"specificity of investment for food production/processing is arguably not that high (eg a farmer can have sheep, cattle, hogs, etc without substantially changing his lands; also a slaughterhouse would be able to switch from one to another specie at a reasonable cost). "
Take this example, you can't just switch in weeks or months. You have a heard of 5,000 cattle of various ages. That is a huge investment. The only way to get rid of it is to sell it for beef and you will have to be doing that for years (as you have young that will take time to grow). So you can switch from cattle to sheep over time - but that is the point, we are talking years to do this. No one is going to shoot their cattle dead, leave them to rot, and then buy sheep.
"Secondly, there are important costs of price controls:
- the implementation and surveillance are expensive, require a large bureaucracy
- they lead to inefficient resource allocation in the economy, as prices no longer reflect economic fundamentals and send incorrect signals
- incentives for investment, innovation and hard work are diminished."
These problems are true of any redistributive system. They create distortions (the whole point is to create a distortion in how food is consumed!! you want poor people eating more).
THe only ones that are unique to price controls are reducing investment and the effects getting worse with time. That is a downside to price controls.
But the up side to price controls is they can be implemented immediately and so can respond to an emergency situation like Venezuela clearly had. ANd they worked.
So really the whole topic of discussion of this is when should they be lifted. I think they should be lifted soon. With the state of the economy being what it is I think they should be lifted this year.
- "putting price controlls on imports would be self-defeating. But that is not what is happening."
So, there are no price controls on imports? Meaning imports of regulated products can be sold more expensively? I highly doubt this...especially given that domestic production is down and consumption up.
- "Sure there could be problems with contraband. But I won't be large - it is hard to sneak a cow out of the country or even its meat which has to be refridgerated."
So it is forbidden to export agricultural products? If so, it eems the Heritage Foundation has a point then..
- "This is the most serious of the problems that you have brought up and is a real threat to the effectiveness of the controls - the black market."
Not necessarily the black market. You can also legally circumvent price controls.
- "- no reasonable firm will incur losses for years."
It depends. It may take time for a farmer to switch. However, for a supermarket it's easy to stop selling a product at a loss. So it would be for a slaughterhouse to change the specie treated. Even more so if food is imported, then producers will be under no obligation whatsoever to sell their products to Venezuela where they get less for them.
- "These problems are true of any redistributive system."
No. Price controls have far more dire consequences, contributed to, for example, food allowances. Food allowances don't change the incentives to produce, investment, don't distort prices, etc.
- "ANd they worked."
They did not. See the empty shelves. There is just no way negating this, although you try to blame it all the time on "higher consumption". If the market were allowed to play, there would be NO such shortages.
Life expectancy is higher, infant mortality is lower, and costs are lower in countries with socialized medicine than in the U.S.Those statistics are nice, but misleading. Infant mortality is unfortunately sometimes calculated differently by each country. In many countries, a prematurely born child would die immediatly and not be counted as a live birth, and thus not counted towards infant mortality. In places that have highly effective medical care, the ICU would try to keep the child alive for as long as possible. The death of this prematurely born baby would then count towards the infant mortality rate.
Those countries have more successful outcomes with particular diseases too, such as cancer, which I'm sure you can look up if you want.
As for life expectancy, there are many factors that effect it - such as obesity. The US has far too many obese people, and there are a laundry list of diseases that are more likely when someone is obese.
I will however agree that costs are lower.
Are you making up a likely scenario?Likely scenario or not, is this supposed to be a rebuttle to my earlier comment?
Well actually maybe you are. It is kind of the situation they have with cars which you have to wait months to get - yet consumption of them is up 50% or so. And cars don't have price controls either!
Small Oil Company Strikes Black Gold
Publication: Associated Press
Date:4/06/08
A tiny oil and gas company based in Dallas, Texas that has working interests in Gulf Coast and Mid-Continent areas yield a millions of barrels or more of oil, the Associated Press reported.
Geologists are calling it a great find – one of the few large onshore discoverys in at least 15 years .35 million to 65 million barrels of oil. Located in a region of complex geology long abandoned for exploration by major oil companies. It’s turning out to contain high-quality oil.
With the secret not out just yet , industry players expect a very high bidding war to break out at the Gulf Coast and Mid-Continent areas. At today’s oil prices the discovery will bring Millions of dollars to this small based Dallas, Texas company. Although the discovery is still playing out, the oil will take some time to recover. In the mean time a Big major oil company has offerd to step up to the plate to help with the recover in a joint team effort. This small based oil company can also find its self in the bidding war between Big oil companys to take full control of the company.
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