Economics Questions

Re: ExxonMobil CEO Says Oil Price Should Be $60 To $70 A Barrel

Cortes — Sat, 04 Aug 2012 18:13:52 GMT

What's a good beginner level introduction to this topic? Does The P.I.G. To Capitalism touch on this?

I have to deal with somebody who constantly rants about how the middle class is screwed because of Wall Street's unfair advantage in futures markets and oil prices and how CEOS want to screw everybody and yada yada and the government "should do"... well, of course this person has no goddamn idea what they should do but they sure love to watch MSNBC and listen to Paul Krugman every day.

Re: ExxonMobil CEO Says Oil Price Should Be $60 To $70 A Barrel

myhumangetsme — Fri, 27 Jul 2012 04:45:53 GMT

You're missing the point.

Then enlighten me oh Swaminanda of Mises knowledge, what's the point? That you now wish to shift definitions as a convenience to an argument you failed to make until now?

And are you 100% certain you'll be getting up tomorrow?

Re: ExxonMobil CEO Says Oil Price Should Be $60 To $70 A Barrel

DD5 — Fri, 27 Jul 2012 03:33:52 GMT

myhumangetsme:
Betting on what in a casino?

You're missing the point.

myhumangetsme:
Not all games you bet on in a casino are equal in terms of the odds of outcomes,

You're missing the point.

myhumangetsme:
and again, gambling on the whole is not a "zero-sum" game.

You too are now conflating two entirely differnet things.

1. The initial exchange - two friends exchange their time to play a game.

2. The game itself - beat your opponent (or the house, or the machine, or whatever....)

The former always results ex-ante in gain for both parties

The latter always has a winner and a loser.

It is simply an intellectual error to conflate the two as is often done by popular opinion. I suggest you and a few other here familiarize yourself better with the Austrian-Misesian take on this topic before you reject something you obviously are not familiar with. I suggested a good starting place up thread.

Particularly, you want to familiarize yourself with Mises' insight on the two different types of probabilities - Class probability and case probability.

Re: ExxonMobil CEO Says Oil Price Should Be $60 To $70 A Barrel

myhumangetsme — Fri, 27 Jul 2012 03:05:43 GMT

If you are to remain logically consistent with your main assertion that speculation is basically like betting in a casino...

Betting on what in a casino? Not all games you bet on in a casino are equal in terms of the odds of outcomes, and again, gambling on the whole is not a "zero-sum" game.

No outcome of human action is certain!

Are you 100% certain you'll wake up tomorrow?

Seriously, you're taking this way further than is even reasonable.

Re: ExxonMobil CEO Says Oil Price Should Be $60 To $70 A Barrel

DD5 — Fri, 27 Jul 2012 00:40:59 GMT

Malachi:
Lay it out for me

I kinda already did but I'll say this.

If you are to remain logically consistent with your main assertion that speculation is basically like betting in a casino, then you must insist that all business and not just this or that speculation activity is nothing but one big casio where there are losers and there are winners. After all, all human action is speculation. All market exchange involves speculation. No outcome of human action is certain! So the market to you is one big casino.

But again, this is can't be so because a casino game always results in a winner and a loser. And we're not talking about the outcome of the exchange itself that brought about the game into existence in the first place. We're talking about the outcome of the game itself. You seem to be now conflating those two different things also, introducing even more confusion into the argument.

Re: ExxonMobil CEO Says Oil Price Should Be $60 To $70 A Barrel

Malachi — Thu, 26 Jul 2012 23:12:55 GMT

No, I'm suggesting that you are conflating betting with speculation (in the context of market activity). The stock market is indeed just a "casio" if we follow your assertion to its natural conclusion.

youre going to have to articulate the difference in plain language, as the definition you posted is inclusive with respect to speculation. The options market isnt a casino, but they both offer gambling services.

Definition From HA: A bet is the engagement to risk money or other things against another man on the result of an event about the outcome of which we know only so much as can be known on the ground of understanding.
Now, this is not just a matter of semantical definitions because the very act of speculation (which is essentially every human action on the market!) is an entirely different type of engagement then stated in the above definition suitable for all type of gamings, i.e., casinos, horse races, etc.......

please explain. Do speculators know more than "can be known on the ground of understanding"? Or do you assert that options and futures traders dont "risk money or other things against another man on the result of an event"? Lay it out for me.

Market activity is not men betting against each other as bogart had suggested (regarding at least some types of exchanges he referred to), where you always have a loser and a winner.

do you assert that betting is not market activity? Do you assert that voluntary exchange always and necessarily involves zero losers and plural winners? In what time frame? Is your claim that gambling is not speculation because it necessarily results in one party as a "loser"?

This entire argument should have ended once the false assertion was made (perhaps carelessly) that speculation is a zero-sum game

I must have missed that, I will go back and look

zero-sum game (as is the case for gambling)

gambling is not always zero-sum. Sometimes, indeed most of the time, individuals derive psychic profit from their actions. Sometimes this is the result of the exchange of probable outcomes (which includes risk transference), the very same profit that one or both parties derive from futures trading and stock options.

Re: ExxonMobil CEO Says Oil Price Should Be $60 To $70 A Barrel

myhumangetsme — Thu, 26 Jul 2012 22:08:46 GMT

No, I'm suggesting that you are conflating betting with speculation (in the context of market activity).

In essence they are the same, I'm not sure why you're having such a hard time getting this.

Definition From HA: A bet is the engagement to risk money or other things against another man on the result of an event about the outcome of which we know only so much as can be known on the ground of understanding.

What exactly about this definition do you believe is in conflict with what is meant by "speculating"? Look at dictionary.com's definitions:

speculate: to engage in any business transaction involving considerable risk or the chance of large gains, especially to buy and sell commodities, stocks, etc., in the expectation of a quick or very large profit.

bet/wager: a pledge of a forfeit risked on some uncertain outcome; something risked or staked on an uncertain event

So again, what fundamentally do you believe is so different here between the two?

This entire argument should have ended once the false assertion was made (perhaps carelessly) that speculation is a zero-sum game (as is the case for gambling)...

Who says that gambling is a zero-sum game?

Re: ExxonMobil CEO Says Oil Price Should Be $60 To $70 A Barrel

DD5 — Thu, 26 Jul 2012 18:51:36 GMT

Malachi:
you must not be aware of the phenomenon of betting on events, such as sporting events and animal contests, that are uncertain but non-probabilistic. Are you suggesting that betting on a football game or horse race isnt really betting?

No, I'm suggesting that you are conflating betting with speculation (in the context of market activity). The stock market is indeed just a "casio" if we follow your assertion to its natural conclusion.

Definition From HA: A bet is the engagement to risk money or other things against another man on the result of an event about the outcome of which we know only so much as can be known on the ground of understanding.

Now, this is not just a matter of semantical definitions because the very act of speculation (which is essentially every human action on the market!) is an entirely different type of engagement then stated in the above definition suitable for all type of gamings, i.e., casinos, horse races, etc.......

Market activity is not men betting against each other as bogart had suggested (regarding at least some types of exchanges he referred to), where you always have a loser and a winner. But that's what you are essentially implying by equating betting with speculation. This entire argument should have ended once the false assertion was made (perhaps carelessly) that speculation is a zero-sum game (as is the case for gambling), which revives the old fallacy that voluntary exchange is a zero-sum game.

Re: ExxonMobil CEO Says Oil Price Should Be $60 To $70 A Barrel

Malachi — Thu, 26 Jul 2012 18:19:09 GMT

The "risk" associated with of Human Action, more accurately termed as uncertainty by Austrians, does not conform to the theory of probability.

you must not be aware of the phenomenon of betting on events, such as sporting events and animal contests, that are uncertain but non-probabilistic. Are you suggesting that betting on a football game or horse race isnt really betting?

I don't know what you're talking about here.

in that case, I suggest that you refrain from using blackjack as an example of your narrow definition of gambling.

Re: ExxonMobil CEO Says Oil Price Should Be $60 To $70 A Barrel

DD5 — Thu, 26 Jul 2012 15:57:25 GMT

Malachi:
ok, explain to me how its false

The "risk" associated with of Human Action, more accurately termed as uncertainty by Austrians, does not conform to the theory of probability. It is a matter of what Mises called case probability as oppose to class probabililty. I suggest you go over Ch 6 in HA and understand the difference between the two types of probabilies. This will help explain to you the differece between speculation and gambling. The two are entirely different.

http://mises.org/humanaction/chap6sec1.asp

Malachi:
Are you suggesting that the MIT blackjack team wasnt actually betting at blackjack because they were actually speculating, and the individuals playing next to them were betting?

I don't know what you're talking about here.

Re: ExxonMobil CEO Says Oil Price Should Be $60 To $70 A Barrel

Malachi — Wed, 25 Jul 2012 23:43:53 GMT

Well if one uses the terms "gambling" and "bets" in this context in a metaphorical sense, and it is well understood that this is how it is used, then you would have a valid point.

thats not my point. Describing futures contracts and options as bets is not a metaphor. Its jargon.

However, Bogart came back and confirmed my suspicion that indeed, speculators are literally placing bets, i.e., gambling like in black jack. Now, this is entirely false.

ok, explain to me how its false. Are you suggesting that the MIT blackjack team wasnt actually betting at blackjack because they were actually speculating, and the individuals playing next to them were betting?

Is pointing out a fallacy in an argument still fair game on this forum? or is it now considered to be too insensitive to do so?

are asking because youre upset that I am addressing fallacies in your argument? Would you like me to be more sensitive to your emotional state?

Re: ExxonMobil CEO Says Oil Price Should Be $60 To $70 A Barrel

DD5 — Wed, 25 Jul 2012 20:22:21 GMT

Malachi:
DD5, youre being needlessly pedantic. Futures contracts and options are frequently described as bets by people who actually buy and sell them.

Well if one uses the terms "gambling" and "bets" in this context in a metaphorical sense, and it is well understood that this is how it is used, then you would have a valid point. However, Bogart came back and confirmed my suspicion that indeed, speculators are literally placing bets, i.e., gambling like in black jack. Now, this is entirely false. Is pointing out a fallacy in an argument still fair game on this forum? or is it now considered to be too insensitive to do so?

Re: ExxonMobil CEO Says Oil Price Should Be $60 To $70 A Barrel

Malachi — Wed, 25 Jul 2012 18:38:18 GMT

DD5, youre being needlessly pedantic. Futures contracts and options are frequently described as bets by people who actually buy and sell them.

Re: ExxonMobil CEO Says Oil Price Should Be $60 To $70 A Barrel

Wheylous — Wed, 25 Jul 2012 18:21:08 GMT

I think he meant risk...

Re: ExxonMobil CEO Says Oil Price Should Be $60 To $70 A Barrel

DD5 — Wed, 25 Jul 2012 17:55:10 GMT

Bogart:
Yes, to the speculator the contract is gambling.

And if to the speculator the world was flat, it would make it so?

Bogart:
How is that different from placing a bet on a black jack table where your purchase of chips is a contract at the beginning to convert the total number of chips at the end into cash by selling them back to the casino?

Casino games obey the mathematical laws of probability. Speculation on the market does not!

Gambling is theory of probability applied. Speculation is theory of entrepreneurship applied.

If you're not convinced, then you should be able to demonstrate how you can calculate the probability of making a "winning bet" on this or that "futures contract" or whatever....

Bogart:
The mechanics are different granted but that does not change speculation to anything other than a zero sum game.

How so? Both buyer and seller made the exchange voluntarily. Ex-ante both made a gain. Not so for zero-sum games, by definition.