I read over my economics text-book earlier today. I saw in the chapter I was reading that they called the state when there are tons of resources in the economy a positive externalize. Apparently when there are lots of resources in the economy it is called a market failure. One of the solutions the text-book author gave when this state of affairs came up (when there are lots of one resource in the economy) is to solve the problem by reallocating the resource to the government. I don't understand this. It doesn't make sense to me why they call it a market failure..
Wouldn't it be a good thing for firms to have resources in the economy? And all a government would be doing would be taking away the wealth. How is this a market failure? Am I as confused as anyone else here? I don't get this...
Do you have a scanner? If so, could you scan and upload the relevant pages? The way you paraphrase the argument, it makes it kind of confusing (or, maybe the argument is confusing originally, I don't know). For example, what does the book cal "tons of resources"? Do you mean an oversupply?
Jonathan M. F. Catalán: Do you have a scanner? If so, could you scan and upload the relevant pages? The way you paraphrase the argument, it makes it kind of confusing (or, maybe the argument is confusing originally, I don't know). For example, what does the book cal "tons of resources"? Do you mean an oversupply?
Wait, I see. I might have misunderstood it. The text-book was referring to how sometimes market demand fails to take into account how much consumers really want. I was just confused about what it meant by an underallocation of resources. I thought it was talking about a misallocation of resources. (Like if there was too much).
"External benefits mean that the market curv,e which reflects only private benefits, understates total benefits. The demand curve for the product lies farther to the left than it would if the market took all benefits into account. As a result, a smaller amount of the product will be produced, or, alternatively, there will be an underallocation of reosurces to the product-- again a market failure".
That's where I got confused. Never mind. It wasn't talking about oversupply. It was talking about an undersupply.
By that excerpt, then isn't everything a market failure?
To paraphrase Marc Faber: We're all doomed, but that doesn't mean that we can't make money in the process. Rabbi Lapin: "Let's make bricks!" Stephan Kinsella: "Say you and I both want to make a German chocolate cake."
*Head Implodes* Total benefits for who? According to who? Oh right, the government, because apparently people don't know what they want.
As the chartists like to say: "The price is the story."
SilentXtarian: "External benefits mean that the market curv,e which reflects only private benefits, understates total benefits. The demand curve for the product lies farther to the left than it would if the market took all benefits into account. As a result, a smaller amount of the product will be produced, or, alternatively, there will be an underallocation of reosurces to the product-- again a market failure".
If this is an exact quote, I'm not sure how the author(s) of the book came to this conclusion. Even if entrepeneurs made decisions based on some model where he demand curve was estimated to be somewhere, which they don't, why would they overestimate the demand curve? Does the book evolve the point?
Daniel Muffinburg:By that excerpt, then isn't everything a market failure?
Jonathan M. F. Catalán: SilentXtarian:"External benefits mean that the market curv,e which reflects only private benefits, understates total benefits. The demand curve for the product lies farther to the left than it would if the market took all benefits into account. As a result, a smaller amount of the product will be produced, or, alternatively, there will be an underallocation of resurces to the product-- again a market failure".If this is an exact quote, I'm not sure how the author(s) of the book came to this conclusion. Even if entrepeneurs made decisions based on some model where he demand curve was estimated to be somewhere, which they don't, why would they overestimate the demand curve? Does the book evolve the point?
SilentXtarian:"External benefits mean that the market curv,e which reflects only private benefits, understates total benefits. The demand curve for the product lies farther to the left than it would if the market took all benefits into account. As a result, a smaller amount of the product will be produced, or, alternatively, there will be an underallocation of resurces to the product-- again a market failure".
SilentXtarian: How is this a market failure?
How is this a market failure?
There is no such thing as market failure.
The book is rubbish. Burn it as soon as possible.
SilentXtarian:Wait, I see. I might have misunderstood it. The text-book was referring to how sometimes market demand fails to take into account how much consumers really want. I was just confused about what it meant by an underallocation of resources. I thought it was talking about a misallocation of resources. (Like if there was too much).
One does have to wonder that if humans don't know everything, how can the humans in government know how to allocate the resources if the resource owners don't?
IOW: "market failure" is just code for government power-grab. Period. It doesn't exist in any real form in the market, but is always a product of government meddling, which then means MOAR GOVERNMENT.
i have to say, that as a new participant to this forum i have had to expand my vocabulary, learn some new words, and relearn the definitions of some not-so-new words, but, in general i can honestly say that i never see big confusing words used where little easy words would suffice.
that quote is so obfuscating its absurd. that the economic intellectuals try to make economics so complicated should out them for the frauds they are, except most people cannot figure out that they are frauds cause they can never figure out what they are saying.
deciphered, it is claiming that there is some additional demand of which for some reason the market is unaware, until the demand comes calling, at which time there is a shortage of supply, duh
have to go with ansury here, bun it.
Ansury: The book is rubbish. Burn it as soon as possible.
I was tempted to verify this as the answer.
SilentXtarian: Why do people call having a lot of resources a market failure?
Why do people call having a lot of resources a market failure?
Because the economy is a big static pie and if one has more, someone else inevitably has less.
Although that does leave the question what all those people are doing at work all day, because I don't believe everybody is just shuffling goods around and doing NOTHING to it.
And why would someone EVER give something up?
Jonathan M. F. Catalán: Ansury: The book is rubbish. Burn it as soon as possible. I was tempted to verify this as the answer.
I thought someone would get a kick out of it!