Economics: I, Pencil

[Chaos]

As with everything else, profit. I don't know the exact mechanism the market would employ, but then, I don't know how to make a pencil, either...and neither does anyone else.

This is what's frustrating me about this thread...the pencil proves that questions—nay, demands—like the ones you just gave are invalid. They are arguments from incredulity.

Profit from, say, writing a book is made by selling the book - ideally, one copy per person who wants to read it. So if 10,000 people want to read book, 10,000 copies will be sold.
So, for each book, the publisher will have, say, $50,000 revenue and $10,000 costs - leaving $40,000 profits.

However, with copyright, what would prevent the following situation:
A new book is published, one person buys it, scans it, puts it on the internet, and the other 9,999 persons download it for free.
The next book it published, another person buys it, scans it, puts it on the internet, and the other 9,999 persons download it for free.
So for each book, the publisher will have $5 revenue and $10,000 costs - leaving $9,995 losses.

 

[DavidJames]

As with everything else, profit.

so profit is the motivation for everything, an example of where we agree.

And this is exactly why some companies knowingly "cheat" in today's system even with the rules and regulations. Some get away with it, some get caught. The same dishonest people will "cheat" under your utopian system, except under that system, everyone will get away with it.

There are dishonest people out there. Some are wear ski masks and lurk in dark places to steal your money. Some wear suits and attend conference calls and steal you money. Laws are in place to protect honest people from dishonest ones. The "market" does not deal with this reality today and I have seen nothing to suggest it would change dishonest peoples behavior in your system.

 

[Earthborn]

As with everything else, profit. I don't know the exact mechanism the market would employ, but then, I don't know how to make a pencil, either...and neither does anyone else.

This is what's frustrating me about this thread...the pencil proves that questions—nay, demands—like the ones you just gave are invalid. They are arguments from incredulity.

Interestingly I think you may have discovered a new fallacy and you are using it. You use an argument from incredulity backwards.

An argument from incredulity is usually used to speak about things that happened in the past, for example: "I can't conceive that life could have arisen without a God, so there must have been a God"
Your argument tries to show that something will be true in the future, even though one cannot imagine yet how it will.

The problem with your argument is that if no one yet knows how a problem will be solved in the future, there is no evidence that it will be solved. Your argument is similar to the following argument:

"I don't know exactly how a time machine can be made, but I don't know how to make a pencil either... and neither does anyone else.

The pencil proves that asking—nay demanding— to know how to make a time machine before accepting that it is possible to build one are invalid. They are arguments from incredulity."

Of course they are not arguments from incredulity at all: they are reasonable questions about how something might work and you don't have to answer them in great detail. But if you can't even sketch a rough outline of how it might work, then you have no evidence that it will work the way you claim it will.

It is your claim that innovators will still be motivated to innovate without government protection of their innovations. Asking how they will be is not an argument from incredulity, because asking something is not providing an argument or making a claim.

 

[Earthborn]

No, that can't be the answer, because shanek was talking about non-patented products. I was asking him about patented products.

The question remains unanswered.

I have to disagree with you here. Shanek provided the example of unpatented products to show that (he thinks) products can be protected even without patents, making patents unnecessary.

In a world without patents, there are no patented products. They are all unpatented. So you can't expect him to give an example of how patented products would be protected in such a world, because they would not exist. He imagines a world where all inventions that are now protected by patents are protected by keeping them secret, or are not protected at all.

 

[shanek]

He did answer it and it seems very simple superficially: "keeping a trade secret".

That's just one possibility. And far from naïve, it happens all the time. The tradeoff with patents is that, in exchange for the exclusive use of the patent over a certain period of time, you have to release the way your invention works to the world, and they can all study and experiment with it and be ready with their own competing products when the patent runs out. So it's a trade-off.

And, for the record, I'm not against patents; I just think they've gotten ridiculously out of hand and I don't think it's at all naïve to think that the free market can come up with its own patent-like or patent replacement system.

 

[shanek]

No, that can't be the answer, because shanek was talking about non-patented products. I was asking him about patented products.

The question remains unanswered.

That's ridiculous, Claus! You can't have patented products in a country that doesn't have patents!

 

[shanek]

However, with copyright, what would prevent the following situation:
A new book is published, one person buys it, scans it, puts it on the internet, and the other 9,999 persons download it for free.

There's already technology in place to deal with that. You can download an e-book with copy prevention technology when you purchase the book, and as for scanning a physical book, there's watermarking technology that is invisible to the reader but shows up on the scan. See, this is a problem even with copyrights. You don't need to make it impossible to copy; you just need to make it so difficult that they may as well just pay $5 for the book.

 

[shanek]

And this is exactly why some companies knowingly "cheat" in today's system even with the rules and regulations.

Of course. We can't rely on the rules and regulations, everyone knows that, so the free market is inventing ways on its own of cutting down on it with no government necesary.

There are dishonest people out there. Some are wear ski masks and lurk in dark places to steal your money. Some wear suits and attend conference calls and steal you money. Laws are in place to protect honest people from dishonest ones.

And I have no problem with those laws. I have a problem with laws that punish everybody, even the ones who have committed no dishonest acts or acts of force against others.

 

[Earthborn]

Then a) you're talking about a very limited number of transactions in a free market, transactions which actually do not produce a finished product (the ferrule is not the pencil); and b) you're only looking, as I said, at one direct iteration of the process.

Yes. Is that a problem?

You're also pretending as if there is only one supplier and only one manufacturer, which is laughable.

No, I am pretending that they have a contractual relationship. I am pretending that the manufacturer prefers not to search for a supplier everytime it needs a batch of ferrules, but instead has made a deal with a specific supplier to supply it at regular intervals for certain period of time.

If a competitor comes up with a better way to make materials for a ferrule, the manufacturer might switch suppliers all on his own.

Unless the manufacturer has a contractual relationship with the supplier and can't do that according to the contract.

The point is, there are people who need to know all of the ins and outs of government regulation.

You still have not explained why there need to be people who know all of it. I can't even imagine that they might exist, because I'm sure you'll agree that government regulations are often incredibly complex.

That's why I think people, even lawyers, only need to know the parts of the regulation that are relevant to a particular case. If the case is particularly complicated, perhaps not even that, because then a group of lawyers may divide what they need to know amongst them, so they individually only have to know a small part of it.

And that is true. They make more and more steps towards a free market as time goes on.

In what way? What steps were recently taken that make them more 'free' ?

You're also making an invalid assumption that China's population is as productive as they can be, a fact that is very much not in evidence.

I have not made such a claim. I only claim that they are now very very productive, because they seem to make almost everything.

 

[shanek]

Interestingly I think you may have discovered a new fallacy and you are using it. You use an argument from incredulity backwards.

Except that, as the pencil proves, it's not a fallacy; it's how the market works.

Your argument tries to show that something will be true in the future, even though one cannot imagine yet how it will.

Yes, and who could have imagined superhighways, the internet, and modern medical technology 100 years ago?

The problem with your argument is that if no one yet knows how a problem will be solved in the future, there is no evidence that it will be solved.

No, there is tons of evidence. There is just as much evidence as there is for the sun rising tomorrow: because it always has, and we know of a mechanism how it can work.

Of course they are not arguments from incredulity at all:

No, that is exactly what they are. They demand that if I can't provide specifics of how a problem can be solved, that is evidence that the market cannot solve it and therefore we need government intervention. And that's just ridiculous.

But if you can't even sketch a rough outline of how it might work,

I've done that. It only results in the questions getting more specific.

 

[DavidJames]

Of course. We can't rely on the rules and regulations, everyone knows that, so the free market is inventing ways on its own of cutting down on it with no government necesary.

Fine, when the inventions are known and the results tested and verified to improve things, let me know, otherwise, I'll stick with what we've got.

 

[shanek]

Yes. Is that a problem?

It is, because it doesn't relate to the entire process as your argument requires.

No, I am pretending that they have a contractual relationship.

Irrelevant. There is no contractual relationship that says "make a pencil." There is a relationship that says, "make a sheet of brass to these specifications." That does not mean that the process is as inflexible as government, like you claim it is.

I am pretending that the manufacturer prefers not to search for a supplier everytime it needs a batch of ferrules,

No, you are pretending that the manufacturer is not open to alternate suppliers with different ways of doing things, or improvements to the technology from his current supplier. That is required to support your argument.

You still have not explained why there need to be people who know all of it. I can't even imagine that they might exist, because I'm sure you'll agree that government regulations are often incredibly complex.

Again, they exist. CPAs, for example, have to know pretty much every aspect of accounting and tax regulations, at least in the area they specify in. Are you saying H&R Block doesn't know how the tax code works?

 

[shanek]

Fine, when the inventions are known and the results tested and verified to improve things, let me know, otherwise, I'll stick with what we've got.

I've already provided examples.

 

[Earthborn]

And, for the record, I'm not against patents; I just think they've gotten ridiculously out of hand and I don't think it's at all naïve to think that the free market can come up with its own patent-like or patent replacement system.

Maybe, but the point of patents is that is forbidden to make a copy product. As you've often said: a free market organisation isn't allowed to use force without the government allowing it to. So a free market patent system cannot punish the companies that make the copies, and those companies can go on making copies without having to fear punishment. That probably means that those companies will go on doing it, and selling the stuff cheaper then the company that invented it.

 

[EGarrett]

I just got through reading this entire thread.

As an impartial observer, I have to say that Shanek has done a damned good job of articulating his point of view.

Most of the challenges are ad hominem attacks and pure ignorance of economics. (Murder being part of the free market? What?)

There's a few things that haven't been made clear. And I'm sure Shanek will correct me if I'm wrong.

But anyway, Shanek, I don't know why you haven't reminded people that there are certain conditions necessary for a free market to exist, including enforcement of personal property rights.

That seems to be what most people aren't understanding about your point of view.

Murder, copyright violation, fraud etc have no place in a free market. That's the role that government would play in a free market economy (and I imagine that's the only role.)

Earthborn, however, has done a good job of showing some cracks in Shanek's point of view. I haven't really seen him make a good case against her, yet.

The only question I have, is how does a free market protect resources that can't currently turn a profit but might be invaluable in the future? Or non-renewable resources?

For example: People cutting down trees in the wood to sell the lumber, when some scientific development proves later that one of those trees could have had the cure for cancer? Surely, those lands would command a great price after years of research, but right now they're being cut down too fast for that to happen.

How can a free market prevent ignorant profiteers from destroying greater future value? People don't always realize how important things can be in the future, and it would seem some government protection would be necessary to save people from themselves in that case.

 

[digitalmcq]

It is, because it doesn't relate to the entire process as your argument requires.



Irrelevant. There is no contractual relationship that says "make a pencil." There is a relationship that says, "make a sheet of brass to these specifications." That does not mean that the process is as inflexible as government, like you claim it is.



No, you are pretending that the manufacturer is not open to alternate suppliers with different ways of doing things, or improvements to the technology from his current supplier. That is required to support your argument.

Most firms establish ties with other firms (suppliers, buyers, etc) that become integral to their businesses. The market does not consist of masses of atomized actors that engaged in 'one-shot' non-repeated transactions. Rather, networks of firms spring up that are interdependent. Breaking ties between firms is (obviously) possible but it can be very costly for those firms involved. This can lead to reluctance on the part of firms to endanger relationships with other organizations.

I can provide masses of empirical evidence to back this up if you want.

 

[CFLarsen]

I have to disagree with you here. Shanek provided the example of unpatented products to show that (he thinks) products can be protected even without patents, making patents unnecessary.

In a world without patents, there are no patented products. They are all unpatented. So you can't expect him to give an example of how patented products would be protected in such a world, because they would not exist. He imagines a world where all inventions that are now protected by patents are protected by keeping them secret, or are not protected at all.

But this is not a viable explanation: Without patents, you can't send a product on the market that can be copied.

Patents weren't invented by Da Big Bad Gubmint to suppress competition, but to protect inventions from being copied.

Shanek is cornered on this issue, and he knows it.

 

[Earthborn]

Except that, as the pencil proves, it's not a fallacy; it's how the market works.

Tell me where the pencil explains how innovators are encouraged to innovate.

Yes, and who could have imagined superhighways, the internet, and modern medical technology 100 years ago?

Indeed. 100 years ago people had just as much evidence that such things would be invented as you have of a free market intellectual 'property' protection system. That is: absolutely none at all. 100 years ago people had no reason to assume such things would one day exist, and we now have no reason to assume that thing of yours will exist. You can claim as much as you want that 'the free market will find a way' but you don't really know that it will.

I'm sure 100 years ago some people had ideas that never became reality and we now know likely never will... Like time machines, or gravity shielding materials like Cavorite. Just because you can show that the free market gave us many wonderful inventions, does not prove that it will give us time machines and cavorite as well.

There is just as much evidence as there is for the sun rising tomorrow: because it always has, and we know of a mechanism how it can work.

You have not shown a mechanism of the problem might be solved, you have only shown a mechanism that is capable of solving problems: the free market. That does not prove that the free market can solve that particular problem (if we assume it is one).

They demand that if I can't provide specifics of how a problem can be solved, that is evidence that the market cannot solve it and therefore we need government intervention.

No, the ask whether you have any specifics of how a problem can be solved, and if don't have such specifics you have no evidence that it can be solved with the free market and without government intervention.

Asking a question is not making a claim. So asking how something can be done without government intervention is not making a claim that it cannot be done without government intervention. After all: you might be able to answer the question and explain how it can be done without government intervention, disproving that it cannot be done.

But since you cannot explain how it can be done without government intervention, the possibility that it could be impossible remains.

I've done that.

You haven't and you have said so yourself: you can't provide any specifics.

It only results in the questions getting more specific.

As soon as questions become so specific that you cannot answer them, it is time to say that you don't know and also admit that something may be uncertain.

It is okay to have faith that something can and will be solved, but it is not okay to claim that a nice parable about a pencil proves that it will.

 

[shanek]

Maybe, but the point of patents is that is forbidden to make a copy product.

Right, but the tradeoff is you get to see exactly how the product works for free.

As you've often said: a free market organisation isn't allowed to use force without the government allowing it to. So a free market patent system cannot punish the companies that make the copies, and those companies can go on making copies without having to fear punishment.

Unless they enter the system voluntarily. Manufacturers would want to see how products with expired "patents" and soon-to-be-expired "patents" (I'm putting "patents" in quotes because they technically wouldn't be patents, but I can't think of a better word for them) works, to make competing products without a whole lot of R&D and reverse engineering. In exchange, they agree not to sell any listed product in their system before the expiration date. The whole thing could be enforced contractually.

This actually isn't too far-fetched. Corporations trade patent rights all the time and make these same kinds of deals with each other.

 

[shanek]

But anyway, Shanek, I don't know why you haven't reminded people that there are certain conditions necessary for a free market to exist, including enforcement of personal property rights.

Well, I've hammered that point many, many times in many other threads. I guess I just have to feel that something has stuck with these people.

Earthborn, however, has done a good job of showing some cracks in Shanek's point of view. I haven't really seen him make a good case against her, yet.

She's good at that. Debating her is a delight, and I honestly mean that. She's the one poster here that really keeps me on my toes.

The only question I have, is how does a free market protect resources that can't currently turn a profit but might be invaluable in the future? Or non-renewable resources?

For example: People cutting down trees in the wood to sell the lumber, when some scientific development proves later that one of those trees could have had the cure for cancer?

Trees aren't non-renewable. The more demand there is for trees in a free market, the more those trees are planted. The only exceptions people come up with, when I look into it, seem to be tied to government. Government sells rights for logging companies to come in and just take the trees, and of course they are left with no incentive to plant new ones. That isn't the case on land owned by the logging companies.

How can a free market prevent ignorant profiteers from destroying greater future value?

Simply by holding them responsible for it. Look at Love Canal, for example. Or compare any of Weyerhauser's logging areas to your average Federal land. And Weyerhauser maintains that not because of any environmental regulations but because of ISO 14001 standards they've voluntarily agreed to.

People don't always realize how important things can be in the future,

Free marketeers are much more apt to realize this than government, which usually doesn't look to far beyond the next election.