Umm... did you bother to read my entire post before replying? The bulk of it was in response to just this objection. And by the way, a monopoly is NOT a free market device. In fact your beloved government is to blame for the granting of monopoly for the two examples you cite. That's not a free market solution to the innovation problem. It's a government solution. It's disingenious to suggest that the government is the solution to free market problems then cite a GOVERNMENT problem, instead of a free market one. As a matter of fact the going belief is that all monopolies are government caused. A free market abhores them.
Yow, I did not say the government should interfere with free markets at all, and I only support the interference to promote the safety of consumers. i am actualy what i describe as a 'reformed socialist'. I only support the government regulation of markets to promote safety now a days. I am not beloved of the government any more than other people who studied the libertarian sentiments in the 1980s.
I did not suggest that the government was best at regulating free markets at all.
And I have no proof that companies set prices by what the market will bear, it is merely a belief and holds all the water that a belief usualy does.
My thinking is along the lines of the way that prices on video games and DVDs seems to be based upon what consumers will spend rather than competitive pricing, and it makes inherent sense that would happen in a free market, demand is high, so prices are high.
I do note that persription prices seem to be influenced by both the government and the people who lobby the government.
I was recntly shocked to find out what my 'generic' drugs cost without insurance. In the case of my antidepressant it is almost the same as the name brand drug, so I feel that there is a motive in charging the higher cost that is not based solely upon competition.
But then see I am the consumer, so i want the drug at a much lower cost, but i am sure they are selling it at the cost they have determined people like me will pay for the drug.
Which is the way the free market works, i understand that. Competition is not the sole determiant of price was my sole point.
i also note that in the burger market, where it seems that the price is often set by what the seller finds the buyer will pay, there has been a lot of competition for the 'bargin' shoppers recently. Which is a good thing.
And while governments creates the monopoly laws , some people other than the government often benefit.
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In this case that "thing" is stay price competitive. Well, shock if I believe that a truly competitve market keeps competitive pricing. It's only one of the most solidly empirically backed prediction of economics. But go ahead, give me a counter example. Provide an example of a truely competitive good (read commodity) which without government interference fails to have a competitive price. I'll wait.
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I undestand that, I was saying that sometimes the profit motive, which is of course the main determinant of bussiness, including some 'charity oraganizations' seems to be a higher concern than the competitive market. Which is why I said that soemtimes it seems that the market is set to what the consumer will bear or pay.
But profit is the reason we have bussiness so that seems to be inherent to the nature of commercial transactions.
You seem to be a well spoken person, and one who is not saying that the 'free market' is the magic panacea to all the ills an economy might face.
But there are many pundits out there who talk as though a free market will sove all problems, which in most ways it does. But sometimes those who promote a free market are promoting something else.
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Thanks. I am usually most parpicatory in threads where I think my expertise has value. For the full disclaimer I do not work as an economist. Like a number of people have mentioned on this thread, I've chosen a career based on my love of it, not on what pays the best. I'm a software writer. But one of my degrees is a bachler's degree in Economics (with a 4.0 GPA.) If i ever burn out on writing software (which I cannot imagine) I'd like to teach economics at the community college level. It is a passion of mine. Just the non-academic career options for economists I find a bore.
I'd like to think that my motivation for participating in such threads is an intent to educate, not persuade. Of course reality is somewhere in between.
You seem to think those are competing notions. They aren't. It's the desire to maximize profits which cause competitive markets to keep competitive pricing. Now, there is an incentive for collaboration instead of competition. (I.e. a cartel.) But cartels aren't free market devices. They are cheats. But have you ever wondered why cartels so rarely crop up? Because there exists a HUGE incentive for the members of the cartel to cheat on one another.
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yes, I know, but sometimes the cheaters still are driven to maximize thier own personal gain
And what does it mean for them to cheat on each other? It means to overproduce their cartel quota or to under cut the price. Both of which bring them closer to the competitive pricing. The profit motive DRIVES companies to competitive pricing in competitive industries.
Yes i agree, but there are times when the profit to be had by undercutting and the volume of sales seems to be under the profit of keeping the price high. So again, hats off to walmart for intoducing Australian diamonds.
I don't believe that it is always the profit motive that leads to cartels, often it is a political/social tools to maintain the pwoer of eleites. And so slowly over time, outside competition will break those cartels. But sometimes very slowly, especialy when they have closed markets or use other means, such as highway robbery, to keep competition out.
There is a lot of 'economies' that is totaly about politics and power.
You claim to know a fair deal about this sort of thing. But your statements indicate a lack of knowledge about introductory micro economics.
I have done as you suggest, but given who i am i disagree because I fell taht very often it is not the science but the politics that i object to. Just because you raed something in a text does not mean that you agree with it, and there is much in my own former field of psychology that is total hogwash and bull manure. I was totaly disapposinted in
Emotional Intelligence, not because the ideas are bad but because they were so unsupported.
I would suggest picking up a high school text book and reading the chapter entitled "competitive industry" or perhaps "price takers." It so happens that in a competitive industry the producers DON'T EVEN GET TO SET PRICES. Think of the tomato farmer. Do you think he gets to choose the price to sell his tomatos at? Heck no. He takes the market price. If he tried to raise it to increase profits he wouldn't sell a single tomato.
I know that again, I feel politics still determines as much of our economy as anything else, that and the personal gain factor. If you live in the Midwest and pay the least attention to things you can be very aware of how a soomewhat free market exists.
And also aware of all the politics that influence the economy.
BTW I have read introductory texts on economics ( I prefer other topics like history) and have many friends who are small bussiness people, or goodness forbid, captains, sargents and soldiers of industry and business.
Hmm... I have not seen much arm-chair critisms of mainstream science fields. Global warming I guess would be a major exception.
perhaps you have rational friends, there is the bootstap theory of mental health and then the whole 'bullying is good for kids' things, much less the governemnt demanding the warning text on antidepressants, due to political pressure.
It's the single determinate of FIRM behavior. A firm has one function... maximizing profits. You seem to intuitively know this, but you consider it a vice instead of a virtue. According to behavior theory individual behavior is utility maximizing, which is a little different.
I wouldn't say it is a vice or a virtue, but there are times when it seems to be detrimental to the corporations involved, due to the profit motive of individuals.
I just find it frustrating when people use it as a political weapon and say that "It will be good for the economy." when what they mean is, "it will be good for me".
Okay, I've taken this subthread back. So what you're saying is that economists have a consensus of belief simply because that belief benifits them? You do know the whole point of the scientific method is to avoid that sort of problem, right?
Aaron
I know that but there is science and there is science, and not all things labeled as science are.
But there are som many playes in the economy, it is more like the brownin motion statistics where the particles in the fluid have more than random factors.
My main beef is the way politicians and the powerfull drape themselves in the glory of the economy, and use the language of the free market but then do something else.
Like when you hear that congess (in it's infinite wisdom) legislated that the Medicare program could not negotiate the cost of medication in the drug program.
But the world is what it is, and I do believe that our system is about the best and tending twoards better.
