What If There Were No Prices?
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- Опубліковано 16 чер 2024
- What if there were no prices? How would you use available resources?
To appreciate why market prices are essential to human well-being, consider what a fix we would be in without them. Suppose you were the commissar of railroads in the old Soviet Union. Markets and prices have been banished. You and your comrades. Passionate communists all. Now, directly plan how to use available resources.
You want a railroad from city A to city B, but between the cities is a mountain range. Suppose somehow you know that the railroad once built. Will serve the nation equally well. Whether it goes through the mountains or around. If you build through the mountains, you'll use much less steel for the tracks.
Because that route is shorter. But you'll use a great deal of engineering to design the trestles and tunnels needed to cross the rough terrain. That matters because engineering is also needed to design irrigation systems, mines, harbor installations and other structures. And you don't want to tie up engineering on your railroad if it would be more valuable designing those other structures instead.
You can save engineering for other projects. If you build around the mountains on level ground. But that way you'll use much more steel rail to go the longer distance and steel is also needed for other purposes. For vehicles, girders, ships, pots and pans and thousands of other things.
Which route should you choose for the good of the nation? To answer, you would need to determine which bundle of resources is less urgently needed for other purposes. The large amount of engineering and small amount of steel for the route through the mountains, where the small amount of engineering and large amount of steel for the roundabout route.
But how could you find out the urgency of need for engineering and steel in other uses? Find out more as Professor Howard Baetjer Jr. from Towson University explains market prices through the railroad thought experiment.
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People in the comments are complaining that they forgot to take the railroad length in consideration. It doesn't matter they forgot it because if they would have included it, the concept was the same. If the railroad through the mountain is faster, the capitalist would estimate how big the difference is and would calculate how much gas he would safe and how much more people would be able to be transferred and then he would be able to make an informed decision based on that. Nobody is saying that not a single capitalist would make bad investments, ofc there would be bad ones. But it's about them being able to make informed decisions in the first place.
They don't think like this is Soviet Russia. They just follow the great leader!
They just want to kill you. but you refuse to see it. Do they need to make clearer zombie noises?
I don't understand how people think the length wasn't taken into consideration.
That's literally why it was going to take less steel...
The idea that market prices are a good representation of what would benefit society the most is based on the idealistic capitalist market system where no externalities, market manipulations, anti-competative and anti-consumer practices and other perversions exist.
The idea that planing can't be more effective than real world prices is based on a understanding of planing by a few people limited by their brainpower and making calculations on hand. In reality technology has solved both the knowledge and the calculation problem for planing economies just like it has done it for planing businesses.
@@user-qi7xx5ih6z Not really how does technology will know what humans demands are and it is still not working just look to china still very inefficient (Have you seen there army the most soldier do not even have night vision and body armor) and millions of people in concentration dying there because they are dangerous for the power of the goverment.
The rest of the argument is just laughable who is able to do market Manipulation the only legal one is the goverment and the rest who tries is going to jail.
Externalies are also a bad argument because if there is a damage of somebody's property rights they will in counter it.
What anticompetative and anticonsumer practices.
A socialist arguing that it is bad that there is no competition but in the same sentence wants to have more central planning.If there is competition the business wants to have the best results for the costumer the competition reduce anti consumer practices and the ability of choice which you do not have in a central planned economy is the power to not let these practices take action.
Just FYI for anyone wanting to look deeper, this video is mixing the calculation problem of socialism detailed by Mises [circa 1920] with the knowledge problem of socialism detailed by Hayek. They have some similarity but really are different things.
Can you elaborate on how they are different things?
@@carlosquinto1383
One shows that people can not obtain the needed knowledge in a central location or entity, and the other shows that even if we assume that they could magically centralize that knowledge they couldn't do meaningful and beneficial calculations with it.
The calculation problem assumes the best case of having perfect knowledge of the economy's current state and only shows that it is not possible for a central power to calculate an optimal (or even good) solution.
The knowledge problem shows that gathering the information needed to know the current state of the economy is not possible in the first place.
One of the best video on economics I've seen in a long time
Even worse, it's not even *explaining* it, we just have to take faith into the idea that prices are the perfect (and the only) indicator of the correct action to take. The entire video is based on a ridiculous dichotomy.
@Lars Magnus Samuelsson Svenssonsenn Magnussvensamuelsson Thor If you think this video is the equivalent of 1+1=2, then you might consider reattending kindergarten until you get the basics nailed down, OK?
@Liberty AboveAllElse What I meant is, they present only the two choices between full free market with magical price stabilization, or central planners who decide everything. Nothing in between. There's no details on how many planners there are. I feel like many people think that there is some sort of privileged group of a dozen people deciding absolutely everything in the country.
Socialism implies democracy at large. It means anyone can contribute, not a small group of people. Managers exist under any system. Even in supposedly "free" markets, surveys and information abound and circulate a lot. But the video presents this as a problem that is unsolvable.
The health care system in the USA is largely capitalist, if not completely. Health is less profitable than disease. Governments often take the slack where the private doesn't want to go because "there is no incentive", i.e. enough profits to be made. For example, the London subway, neglected and ultimately abandonned by the private. Another example, Montréal subway, running on a deficit, but still runs because it's deemed too important for too many people.
The video makes the mistake of "a miracle happens" between business owners trying to make profit, without regard for the well-being of others (the video even acknowledges that), and the state of having ressources used the most "efficiently" because there is a presumed automatic and magic adjustment of prices relative to the problem at hand. The video also assumes that the cheapest bridge is the best choice. Best choice for who? The business owner or the users? The video also assumes that the highest demand is only possible to compute using prices (lowest), which does not reflect real life in practice.
At best, the price system is a broken clock. It seems to work, but it's only by coincidence. And also because we want to believe that it works. What a coincidence that the "best choice" is always in line with the rich capitalists making absurd amounts of profits. That's very convenient.
@@Simboiss Seems like your issue is with the laissez-faire nature of the argument. You're right, efficient use of resources doesn't automatically equate to positive societal gain; this is where the government, or something representing the interests of the social commons needs to enter the picture.
Annoying that this video/discussion ultimately boiled down to free market capitalism vs. centralized 'communism'.
This is the best educational video that's ever been produced covering this subject matter, and should be included in every economics 101 curriculum in the country!
This video has over six hundred comments. Whatever else this might mean, to me it means one thing undeniably: The topic is relevant.
I've tried to read through this mountain of interaction, if only because I am curious to know what the common pulse of sentiment is in response to such a simple message. A lot of things have been said, but some things seem to get repeated often, and I find the patterns interesting.
One thing that gets mentioned rather commonly in response to the video is that market prices aren't perfect. While this is true, I'm afraid it's beside the point. Detractors to the video's message will need to do more than merely cast doubt on the idea of infallible market prices, because the video isn't suggesting that market prices are infallible. For the video to be taken seriously, it isn't necessary for market prices to be infallible. All that is necessary is for market prices to be MORE efficient at allocating scarce resources which are generally perceived to be of value than if those resources were directed by a central planning board. That's the argument behind the video, and so a focus on assessing the validity of that argument should become the sole focus of all would-be counter-arguments. Going on tangents about greed (common to both approaches), corruption (common to both approaches), pollution (common to both approaches) does NOT tell us which of these two approaches will leave us with more unconsumed resources (savings) after projects are completed than the other one will. That is the central question addressed by the video, and I don't see any opponents actively explaining how central planning leaves more resources available for other projects than market prices do. This is what detractors must argue if they want to directly challenge the video.
Another thing I see often is one-liner swipes using crude expletives-or the “propaganda” catch-all-to denote disapproval, as if this is expected to discredit the central message of the video in one master stroke. What this communicates to me is that a counter-argument isn't at the ready; these frustrated souls may feel a strong need to respond, yet are clearly not prepared for the debate.
I am quite happy to see that this video has led to such a lively ongoing discussion. I want to express my sincere thanks to its creators, and especially to Howard Baetjer, for his commitment to addressing the concerns of as many respondents as he has found the time to engage. I was particularly impressed by his grasp of the socialist calculation problem on a deep philosophical level, and I would be proud to know anyone who cares so much about understanding these ideas so deeply and clearly.
I believe the fallacies will persist, especially in this new digital age, where so much is taken for granted about the power of computers. The need to confront confusion and misunderstanding may have never been greater. The counter-claim is always the same in every new age: “The laws of economics are obsolete, and no longer apply. We can safely ignore them now, as they are only shackles that hamper our supreme vision for future society. We finally have the tools to make anything possible.” This claim is not new, but it will be more difficult to counter in an age of super-computing. The challenge will be to clearly express the knowledge problem on philosophical-not on technical-grounds, where the power to calculate more figures faster can finally be seen as irrelevant to the point at issue.
Ideas have power. Better ideas have more power. In the end, the better ideas-meaning the clearer and more efficacious ones-will win out.
R-800, thanks for this very thoughtful, clear comment, and for the attention you have given Tomasz's and my video. I hope to write an article, or maybe come up with another video, that directly addresses the claim that more computation and data transmission capabilities solve the knowledge problem. I think the claim misses the point, but I'd love to spell it out clearly.
You make a good point that prices and market economics don't have to be infallible. The issue is one of efficiency: as you said, the efficient allocation of scarce resources. At this stage, I do believe both science and technology has reached a level of advancement that renders prices obsolete. (In fact, though it has been pointed out in the past and marginalized, we've been capable of moving beyond prices for sometime now.) However, what we're dealing with is a human species embedded with paleolithic emotions, archaic institutions and highly advance tech.
Personally, I no longer see the necessity of prices and market economics, and advocate for a money-less society. While traditional economic thinking might suggest such a thing is impossible, there's reasonable evidence to the contrary. It's something I have studied for some time now, and the science supports the potential to do so. Although, (oversimplified) it would require we rethink not only how we produce, distribute and recycle resources, but also rethink incentive and what motivates us to be voluntarily collaborative.
Ksna Sol, my friend, it is good to hear from you again. I was afraid i had lost touch. I don't have time now, but I want to give you my reactions to the high quality video on "resource-based economics" that you recommended to me. Though it is beautifully done, I believe it is based on fundamental errors. Do you have time for a short back-and-forth?
Howard Baetjer
Yeah, I do. I'll have to check the video again. It's been a while, lol.
Howard Baetjer
Hey, did I miss you? Did I say the wrong thing? lol I wanted to watch the RBE video you mentioned, but when I checked back to see which video I referred you to, I wasn't able to find it. Let me know which video it was you watched if you can. Hope all is well.
Video notes:
- without market prices, it is harder to determine the value of specific items and make decisions on how to properly allocate resources
- price signals show the value of an item, the future demand/supply, and the amount of resources you should consume/make
4:46 There's one small problem with this argument that the market naturally delivers what is "best for society". This claim is true only when all people generally have the same purchasing power, otherwise it's patently false.
Prices are governed by economic demand, not social need. The market therefore delivers, proportionally, what those with purchasing power want, not what is actually needed by people in general. With vast inequality and low labour prices, the masses could starve and all the resources would be used to produce luxury goods. That is, in a market economy, the needs of society as a whole may be ignored while the needs of the wealthy are closely attended to.
@@andrewj22 Except those same forces determine the value of the employees labor and therefore their wages. If a job isn't worth the money and the potential employees go somewhere else for better pay then that job doesn't get done and the business relying on them goes under or improves wages/working conditions.
@@olstar18 Does that somehow have any bearing on my point?
Not all people's wealth and income is a product of selling their labour. If labour prices in general are low, that doesn't mean there aren't still extremely wealthy people with high purchasing power.
@@andrewj22 Actually it does. If you want better pay get a better job. If you think wages as a whole are dropping to much stop encouraging manufacturing to go to other countries. Its a matter of creating a problem and then holding up communism as the solution when it is just more of the same problem.
@@olstar18 I still don't see the connection. Are you saying that all working class people can become as wealthy as the billionaires? If not, then it remains true that the market doesn't deliver what's best for society. Right?
I'm consistently astounded by the vast number of commenters who don't know the first thing about economics who seem to believe they're a subject matter expert.
I think your statement applies to more than just economics comments, but basically the vast majority of opinionated peoples.
As a scientist, it drives me nuts when someone claims to know the secrets of reality when they know virtually nothing on the specific subject they claim to be an expert on.
I'm astounded by the people who don't understand software who claim software can solve the knowledge problem of central planning. On and on it goes, I don't think I'll live to see the day that people stop believing in socialism.
you mean with they the video maker , right? I do not believe they are economic experts or knows what is the best for society or know even that you need scientific facts to proof that prices matter or not
You are right it also makes my angry even though i am not a scientist and so far i see they can not proof there knowledge of this subjects with real world research or situations ( personally i would not give theoraticcaly situations as a example to proof something i hope you understand that)
Dunning-Kruger effect.
Trick question. All of the engineers have fled the Soviet Union. There are only mindless laborers left. Go with the long route using maximum resources.
...umm what?
I don't want to disappoint, but russia doesn't do that bad academically. Well i would have to look it up, but it probably does better than US would without the help of immigrants.
The point might be that those in demand around the world might have better life where they get to choose how to apply themselves rather then be ordered to fulfill a role for the state at a standardized payment under threat prison if they are not compliant. Russian person can be very intelligent but Russian person probably cant tell the government to piss off like he could tell the US government to piss off after he becomes US citizen.
This is just a troll answer, soviets value resources above human lives because human lives are regenerable and expandable. Inhumane or not, if you fail to understand your enemy's logic and just preach to the choir, you manage to educate none and actually inhibit the dialectic.
That is what happened in my country venezuela, I am one of those engineers living in another country!
>All the engineers have fled the Soviet Union
I guess you don't need engineers to be the first nation to put a man into space then, huh?
I had never thought of prices like this: Prices serve to set priority. In an "ideal" society, If the price didn't exist for a finite good, it would be distributed in order of importance to serve the greatest good. So now the people that receive the goods effectively have a price associated with them. Everybody would have different prices for any given good distribution scenario making everything way more complicated than it would be in a universe with prices, but the price function basically is the optimization of this good distribution system. If your job is to determine who gets what in this ideal world, the number that would turn this arduous endeavor into a cake-walk would be the price of the good.
4:46 There's one small problem with this argument that the market naturally delivers what is "best for society". This claim is true only when all people generally have the same purchasing power, otherwise it's patently false.
Prices are governed by economic demand, not social need. The market therefore delivers, proportionally, what those with purchasing power want, not what is actually needed by people in general. With vast inequality and low labour prices, the masses could starve and all the resources would be used to produce luxury goods. That is, in a market economy, the needs of society as a whole may be ignored while the needs of the wealthy are closely attended to.
Prices are a mechanism to for the efficient allocation of scarce resources to the most valuable purposes. Central control has proven to be highly detrimental to the allocation of resources, even in cases where they have some external prices for a rough reference. there is the calculation problem, the knowledge problem, and an incentive problem. That is even giving the best light; once you include the evil underbelly of socialist doctrine and the massive corruption, psychopathy, and inequality baked into the details of the theory and manifesto, the whole thing is doomed.
The answer is easy. You go through the mountain. It is the more dangerous route and more dead workers means less mouths to feed, and, in an inefficient system, less mouths to feed is a good thing. Not to mention you would just get political dissenters to engineer and build the railroad for free under the whip of a dedicated comrade. The same thing goes for the steel that you are so concerned about. You just need to force political dissenters and the socially undesirables to extract the ore and refine the steel for free. This kills two birds with one stone; you get your railroad and you eliminate a political threat. You would also want to build the railroad through the mountain because it is the shortest, and therefore quickest, route, and when you are moving people in cattle cars you want the route to be as short as possible to avoid as many escapes or other incidents as possible.
Of course, once you have worked the most prominent opposition groups to death, you then will need to start cracking down on anyone who criticizes the regime in even the slightest way to ensure that you continue to have free labor. This culture of fear ensures that even the dedicated comrades will work for minimal reward without complaint or criticism of the system. And, voila, you have a system that will work, at least until the regime leaders begin pursuing liberalisation because they recognize the moral and economic superiority of the system.
+Cory Lowe You mean leaders genuinly believe in there thing and set honesty and truth free, no longer fearing it? Dont think so.
+Cory Lowe Nigga I want what you're smoking.
+Cory Lowe Well done, student. You are starting to learn liberty.
I believe this vid is valuable because socialist systems that are democratic fail with resource allocations as well. A dictator cares less about being efficient though in many cases
Or you can do as china does...
...use stick & carrot, instead of stick onyl. Google sesame points! ^^
I've read half a dozen to a dozen books and articles about economic calculation (e.g. Hayek's Collectivist Economic Planning, Hoff's Economic Calculation in the Socialist Society, Steele's From Marx to Mises, Lavoie's NEP), and yet this is the most lucid explanation I have ever seen. Absolutely phenomenal.
+sevendust62 Thanks!
I read somewhere the Soviets even tried just copying prices directly from the Sears catalog which is funny because those prices were derived from the supply/ demand and available resources of a completely different society.
Was that on a truck stop toilet pilaster? LOL FOH
That was the Chinese.
Excellent video! Thank you for the educational resource!!
I'm speechless. This info is awesome!
I really wish that understanding of how resource allocation worked was more common.. Maybe videos like this will help!
You missed the point. All that data is built into a free market capitalist system. Scratching your head over all the minutia is a mute point if that is preserved and in place and faithfully executed.
Best video on this channel in ages! really usefull to share!
+Roeland Creve That's great to hear! Thanks.
This is an amazing explanation of how our civilization has developed through the use of currency and marketing. It really helped me to grasp the overall picture of how supply and demand shape the course of society through money.
You must be really easily amazed. You ever figure out how your smelly uncle pulls a coin out of your ear yet?
@@fun_ghoul Don't keep him in suspense. Tell him how he pulls it out of yours.
Great job, Tomasz! Well done.
Great Video
Which route has the nicer scenery?
amazing! I love this channel!
amazing how a video about capitalism and the free market gets lost on so many making stupid comments.
@Milk Man Marxists don't deny supply and demand dumbass. Have you ever actually investigated what Marx and many others said the LTV was? It *explains* supply and demand.
@@kanehemlock290 Central planning is the exact opposite of supply and demand, where both supply and demand are set in 5 years plan and artificially redistributed.
@@Schazla That literally isn't how planning worked anywhere
@@kanehemlock290 Yeah, communists implemented central planning that totally negated supply and demand, that's even their central negation of capitalism. Free market (Supply and demand), Central planning (5 year plans).
@@Schazla I don't think you know how it worked guy. The government didn't plan every single thing. They literally used money and had problems specifically because they DIDN'T abandon supply and demand. They didn't get anywhere near close to what you think it was.
excellent video
Beautifully explained
Solution; transform humans into a robotic hivemind.
The Cybermen did nothing wrong.
... Cybermen are the communists, and Daleks are the Nazis!!!
You will be upgraded! Delete, Delete, Delete
D3RRANG3D EXPLAIN EXPLAIN!! EXTERMINATE! EXTERMINATE!
This is really fancy way to say “you face the economic calculation issue, comrade”
Fantastic video
This video hints at the answer. Nice
Well in the captalist side you also have to look at what will be more profitable in the long run. What will cost less to operate and which way are people willing to pay more for.
Sad to see Former Soviet Union has become a test case for many economics lessons.
It's a simple fact of life- you learn more from failure than from success.
@@rcgunner7086 soviet union wasn’t communist
@@adamyoung4908 The Soviet Union centrally planned their economy, redistributed wealth to combat class inequalities, and removed private ownership of the means of production. In what way was the Soviet Union not a communist country?
@@88michaelandersen u thought u ate bye😂
@@88michaelandersen Do you know what Socialism is?
Great video
So cool!
Thanks. Keep it up!
Thank you, excellent video...
+Ammo08 Thanks!
Nicely done
very interesting
Excellent, simplified example! Would love to hear a 'Socialist' address this logic with a countering example.
Except Socialism and central planning aren't the same thing, and Socialism doesn't ban prices/money. :V The video unironically wasted time critiquing nothing someone said.
muh roads
@@kanehemlock290 Marxist Socialism is based on central planning.
@Algo+codehawk ```@Kane Hemlock HAHAHAH You evidently do not even know what prices are nor have you even read the original arguments at all - so entitled "Economic calculation in the socialist commonwealth" by mises mises.org/library/economic-calculation-socialist-commonwealth
```
I have. I've heard them before. I've read them before.
```Back then- the socialists even were thankful for the insight provided by mises. lol of course they were as dumb as they are today and as willfully ignorant on economics
```
Oddly Austrians were and are taken less seriously than Marxians. I can guarantee on reading the farthest you are is the communist manifesto.
@@henriconfucius5559 No, it isn't. Central Planning is a usable tenet. You do not have to plan each and every single idea.
Also, the Soviets had money. My point about this video still stands. They are critiquing something that doesn't exist, and are misinterpreting what moneyless society even does for functioning.
You can unironically live in Marxian Socialism and be able to create worker cooperatives which make products that they want to make
This video is genius!! So simple to understand (by rationally-thinking people)! Thank you!
Hayek was masters of prices
I hope to read more his works on prices
Prices provide us liberty
That was a really good illustration of the advantage of the market system in terms of practicality. Another aspect for another lesson would be the fundamental morality of the market system and the unavoidable immorality of any national command society: there is no moral basis for denying people their rightful ownership in private property (whether physical or labor or intellectual, etc.) and their corollary right to trade it with others, contractually, according to privately perceived value. A moral system allows such contracts; a command society is fundamentally immoral in its denial of private property rights and all matters that those rights imply.
Definitely subscribing. Finally, a view that is unapologetic and straight to logical reference.
Superb, the best explanation of why you need money and central planning failure!
+iuliuspro Thanks!
If it's USSR that comes to mind, it had many successes.
@@Simboiss Yes, but it had a lot more failures. You can take a blind man and place him in front of a dart board and have him throw darts. Give him enough and he could score a few bulls eyes. However how would he fare against someone who isn't blind? That's the same situation here.
Without price an item still has value. In its utility. This does not remove the problems brought up in the video but it does hold water.
The more utility a decision offers the better a decision it is. Balancing these is harder without pricing but it is possible through prolonged thoughts and considerations.
great vid
One thing wasn't calculated, but it doesn't really matter anyway: the shorter route means quicker transit, which can increase long term output, if the place where the transit goes worth it (industries there for example).
also since the industries are nationalized the businesses of the nation could easily report demand for products and determine it there
Well it's a though experiment and the voice said both tracks would serve the nation equally as good
@@rathernotsaynoneofyoubuiss2611 serve equally as good, doesn't equal to serve equally as efficient.
@@user-yj3ti9rg7n it pretty much does would you not say a faster train is inherently better as long as it has the capacity/safety etc
@@drewm3996 it would, but most likely the longer one would be cheaper. So it would be made, to maximise profits.
Excellent video demonstrating why central planning doesn't work and why the "invisible hand" does. In a mere 6:39 minutes.
Bravo!
However, it is not "central planning" as in "a single person". There are multiple persons working on the railroad project, both in capitalism and socialism.
It is, Simboiss. It's not about the amount of people involved, it is about the flow of information created in market transtactions that is coded in market prices
The major thing that bothers me is that prices are a very limited form of information. For the decider, it's basically a number, or an aggregate of numbers. Railroads are not built using faceless numbers.
the invisible hand of the free market gave us the 1929 and 2008 crashes
Gustavo C, mostly wrong. The government meddling in the invisible hand of the free market economy is primarily what caused the crashes you mentioned.
Brilliant! Thank you so much for this.
Finally this channel produced a video worth anything.
+Spider58x if you stop stealing by evil of your system, there would have been more.
Perfect explanation!
This video is incredibly easy to understand and Well-thought-out. It helped me better understand and explain economic principles. I will definitely use this to show others
4:46 There's one small problem with this argument that the market naturally delivers what is "best for society". This claim is true only when all people generally have the same purchasing power, otherwise it's patently false.
Prices are governed by economic demand, not social need. The market therefore delivers, proportionally, what those with purchasing power want, not what is actually needed by people in general. With vast inequality and low labour prices, the masses could starve and all the resources would be used to produce luxury goods. That is, in a market economy, the needs of society as a whole may be ignored while the needs of the wealthy are closely attended to.
@@andrewj22 Stop watching Hakim; he has no idea what he is talking about. He's just a disgruntled kid who wants the USA to have bad days.
Show us your calculation? Do we go around, or through the mountain? Show the math to back up your choice.
@@YouLoveMrFriendly The best choice is the one that costs the least of course (presuming a context of only moderate inequality). The video makes that quite clear.
In a context of extreme inequality, there is no economic model that delivers what's best for society.
BRILLIANT
"But muh linear programming"
lmao
@@baseddepartment8338 you think this video is good
This is an excellent video!
+Brandon Lyons Thanks, Brandon! What are some topics or issues you would like to see Learn Liberty cover?
--The Learn Liberty team
+Learn Liberty I would like to see a video on central banking particularly the Federal Reserve and how it has created more income inequality than anything else. perhaps you could also do a Segway video on how central banking destroys the free market.
+Learn Liberty
I would love to see a continuation video of this topic. In Thomas Sowell's "Basic Economics", he talks about how much the lack of prices in the USSR hurt the environment. He said that because of the enormous inefficiencies, the Soviets had to produce 8x the amount of pig iron in order to manufacture the amount of steel needed for manufacturing. This is because (as I'm sure you are aware) the factories would order more than they needed (since prices weren't an issue). It also had to do with other inefficiencies which I think you guys could go over as well.
The result is that a lack of prices ends up being very wasteful and therefore damaging to the environment as well as to the economy. I think taking this angle could help many on the left see the destruction their policies would bring onto something they care deeply about.
Your'e dumb, Brandon.
A good example of how market forces and pricing help in decision making, albeit a little bit oversimplified. For example, as the owner of the railroad, I may not choose the least expensive route from city C to city D, at least in terms of up front cost. I need to consider not only cost of engineering and steel, but number of miles between cities via each route, and cost of fuel to run the train, both present and future. I need to look at time required to complete the project each way, and opportunity cost if I choose to take the route that costs less but perhaps takes longer to build. I need to look at the trip time between cities on each completed route, which will affect the number of trips per unit of time I can expect to run, and in turn affect the total profits I can earn. Through the mountain, while more expensive initially may pay off over time in fuel savings and shorter travel times. I also need to determine what my primary transport market is, whether freight or people, and if people, consider ergonomics and psychological factors as well. If half my passengers get ulcers from fear of derailing on a mountain pass even though they'd save 20 minutes of commute time each day, and consequently stop using the train, I may want to consider the longer route around the mountain. I also need to look at future maintenance cost of both the track and the trains and try to project total cost over expected service life, and indeed if one route will have a longer expected service life than the other. Many of these costs must be guessed at since future maintenance costs, fuel costs, even passenger reactions to the different routes can't be known in advance.
Here's an idea. Let the capitalist abandon cost structure in determining something as complex as the example above. Instead, let him follow a more predictable model based on empirical and historical evidence. We know based on the fact that socialism has historically failed everywhere it's been tried, that socialist central planning will more often than not make the wrong choice. With that in mind, the capitalist need only find a socialist country wherein a similar project has already been done, determine what they chose to do, and do the opposite.
The process could be:
- Do we need a train? Democratic decision.
- Are the resources available?
If yes and yes, do it.
@@Simboiss Ah yes, can't wait to vote every milisecond of my life because someone 300 kilometers away from we decided that they want 3 more toothpicks.
Very good point, however one of the most important resources isn't taken into account at all here. Time. The obvious answer is how much time would be saved over a prolonged period, and if it was significant enough to warrant using up other resources that may be more needed at the moment but may not in the future.
+Conall Kilroy That is the purpose of interest and speculation. Interest serves to carry the future value of something back into the present. Speculation serves to carry future prices into the present.
You're missing the point: The video is showing a trade off between two simple variables. You can add a multitude atop these.
This would be spot on if, there weren't so many people that didn't know the difference between cost and value, if there wasn't overly inflated costs assigned through propitiatory actions, if the general population possessed reasonable levels of truth from a lack of market manipulation, with larger levels of competition. This being said, it's still a far cry better then socialism.
Cost is the objective price paid. Value is always subjective. Value to who? When? Cost is as close as you'll ever get to assigning an objective measure to aggregate subjective human values.
Amazing video!
Keep up the good work!
id never thought about all this. thank you!!!
Think again, dumbass.
That has a solution. The vast complex array of interconnected computers that allow access to mind boggling amounts of information, knows as the internet, can give access to the amount of resources available, and how much demand and supply there is, without the use of pricing
Vtron, I think you are mistaken. It's not the sheer amounts of resources that matters to our using them well, but their value, right? And how could we represent value except in price terms? In economics, demand and supply are quantities (demanded and supplied) at different ... prices. Right?
Howard Baetjer yes, but their value originally comes from their supply and demand. These do need a price in a free market since there is no way to allocate them to any plan (because it would be rejected), and people want to buy things without a third party controlling them. But in communism the supply and demand are separate properties that are used independently to asses where they should end up.
Think about it like this, 100 karats worth of diamonds are being held at an auction. There is a rich man whom pays 100,000 dollars for the diamonds to gift his wife, while there is a laboratory whom could use those diamonds for nanotechnology that could benefit humanity as a whole, but only have 170,000 to offer. In a free market the result would be a happy wife and no nanotechnology advance, but communist(planned) economics suggests that things should go where they are most needed for the benefit of the many.
don't show this to the Zeitgeist socialist club.
The zeitgeist group has a slightly different starting point in that they recognize that humanity needs the ability to create resources out of thin air, or at least, reuse resources perfectly. with one of those starting conditions, as unattainable as they seem, prices in any market can drop to near zero and central planning could work. however, we are still a long ways, assuming we ever figure it out, from that point so markets are our best option.
+Justin Vavak Even if resources seem near infinite, they will become more scarce as we consume more than we produce, under the RBE model. Even if that were untrue, time and Labor *Will* always be scarce, comparatively.
"time and Labor Will always be scarce"
With the tens of thousands of engineers that China alone pours out yearly?
Theres a video, plus a pretty long page from Zeitgeist, attempting to deal with economic calculation. However Peter Joseph admits his equations need work and arent ready. But arbritary equations and inputs produce arbritary answers. It would be just simplier to admit they dont know and would have to guess. And TZM is way better than TVP who dont even want to recognise theres a problem.
Yet all socialists including those who pretend theyre different by relabelling themselves RBE, say they have a solution for a utopian society, even though their systems are missing the most important thing an economy needs. No economic calculation and theyll repeat the disasters of all previous failed systems. That had people starving to death and going without.
Simply follow computations of great robo leader lol
The one thing left out is artificial inflation.
There will always be the human element of meddling. But then every facet of human existence is a victim of that at some point. We just need to be vigilant and do the right thing when that happens.
Haven't watched the video yet, but prices are the mechanism by which scarce resources are allocated to their most productive ends. No mechanism currently exists that is more effective at this, as far as I know.
If this is what you call "effective", I don't want to see "ineffective".
Prices are the mechanism by which scarce resources are allocated to those who can pay the most for them. For example a free market for covid vaccines would have give priority to those with the most money, but national governments decided to be more productive by allocating the vaccines to those who needed them most ie those at risk and vital workers.
@@Simboiss If this is what you call "effective", I don't want to see "ineffective".
Indeed you do not! 'Ineffective' means famine, war, genocide. The record of history is crystal clear.
@@Simboiss Let's see YOUR calculations, Comrade.
@@YouLoveMrFriendly I don't see the solution in terms of "calculations". The world doesn't work only based on a few imaginary equations that magically solves every problem.
If I had to calculate something, the answer would be "zero". Accounting zero. Production costs X give exactly price X.
Anyway, the burden of proof is on the believers, those who push the ideology every day. Where is that fabled effective "calculation" done by the invisible hand every day? Are there any demonstrable math or is it only religious faith?
And this is why we're all rich today ! Oh wait...
Are we not? A poor person today lives in a house that would look like a palace 200 years ago.
@@carecup809 That is quite possibly the most completely and utterly moronic thing I have ever heard.
@@robertgoldstein7623 That's not an argument.
@@carecup809 You comment is so completely and obviously wrong that it doesn't warrant a response.
@@robertgoldstein7623 And yet you did. Twice now. And both times you failed to provide a counter argument.
Oh, i thought the video would be a thought experiment about what would happen if train tickets were for free xD
That would have been a better video.
nothing is free my friend.
but I agree, the thought experiment should a been on free rail lines. I was imagining that passengers would get to shovel their own coal in, and take turns yelling, "all a board!" at the stops.
I guess if you really wanted it, you coulda just watched snowpiercer.
Fantastic explanation of the calculation problem!
+TheHomeless87 Thanks!
THANK YOU. SO MUCH. FOR THIS VIDEO.
YOU ARE. THE TYPICAL. IDIOT WHO WATCHES.
That is a wise concept only if the decision maker can guarantee high quality because low quality comes with greater lost
It is already calculated, as low quality representes long term costs.
Love the art in this vid
And the clarity of the message!
Amazing video, also explaining why Communism and Socialism is bound to fail 🍃
Wow, great video!
I wish this video was a little longer to explain that where one might choose the more expensive option, they are, indeed, demanding more resources that society is in greater need of. But by paying the higher price, you are placing a bid saying that you need that resource more or can make better use of it. The higher price is a means of compensating society for their trust and acts as an insurance if it turns out your use of that resource didn't actually provide as much value as you expected.
This is, without a doubt, the highest quality video that you've produced yet. It's accessible and covers one of the most important, yet neglected, topics in our Liberty Pantheon. Prices are a must-understand in order to realize why libertarianism isn't anti-poor or pro-self.
Craaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaackhead.
Precisely the opposite. Markets don't need to assume the creation of a perfect man untroubled by greed, rather they accept that we can't change human nature, and attempt to create a system where serving your own interest highly correlates with serving the interests of others.
It's not without reason that proponents of free markets say that "social cooperation" is one of the most fundamentally crucial concepts in a free market economy.
And rewards for the most satisfaction of human wants. utilitarianism rewarded! Marvelous!
Ah yes, if only there were more whisky and potato chips...
@@fun_ghoul oh and let me guess, you invest all your money? or do you spend it on useless crap. 99% useless crap I bet. Oh but I'm sure that table you didn't need is very useful! hah idiot. Or feminism? oh that's very useful to spend on. good thing you're not in charge
This is amazing stuff
You mean the drugs you took before commenting, right?
Great video, thanks!
I prefer the survey method. I will practice it on commune in coming years
Businesses collect data all the time. Why can't a nationalized railroad business do that?
@Liberty AboveAllElse Okay, so you tell me. Why are governments inefficient? Can you provide a comparative example? Remember, the London subway was taken back by the government because the private didn't want (or wasn't able) to take care of it. Does that mean the private was inefficient?
I don't see how you can say such a thing about government inefficiency relative to the video's example with the railroads. The video does not show any numbers, and it doesn't compare government vs private management. So, how do you come to such conclusion?
That only works on a small scale
@@Simboiss I guess that tells you a lot. The cost of running the subway just wasn't worth it because people weren't spending the money on it that is necessary to make it work for a profit (costs of running it vs. the money gained). So if it were a business it would go out of business. Take Blockbuster as the example. It was a great idea at the time (80's-early 00's), but technology overtook it and it wasn't profitable, so it disappeared down to just one curio store. Now the government could come in and "make" it work, but who exactly is that benefiting?
I think the people of London were voting with their money and just not using the tube because they had other means that they preferred (perhaps cheaper ways or more comfortable ways, who really knows?). Another question is how much freedom did the private company who ran the tube actually have? What did the government actually allow them to do? If the government still tightly regulated what they could do then no wonder the private business dropped out. Government regulation can easily kill businesses or make something that could be profitable rather unprofitable. Even something as "vital" as the tube.
You forgot to account for how much of the steel and engineering talent is needed for weapons production, above all else.
So, how would automation of work and deep learning (computing) affect this thought experiment?
+Cooper de Ruiter And since this is a communication problem, what about the internet? This video says "information gathering is virtually impossible without using money as the communication protocol". Ask Google and Facebook about protocols, they seem to be good at... communication.
+Byllgrim and +Cooper de Ruiter It is not just a communication problem. It is also a problem of establishing the value of things "at the margin," as we say. Electronic computation of one kind or another has long been suggested as a solution to "the knowledge problem" that we pose here. There are two problems with it. The first is that data are people's preferences, which have no magnitudes until they are expressed in the prices people are willing to pay. The second is that even if all the millions of people's preferences could be quickly communicated to a central decision maker, that central decision maker would still need to weight each piece of information so as to come up with a value judgment about the relative importance--in society generally at that time and place--of each different resource--steel and engineering in our example. No planner can know how to weight them. Right?
It would just destroy it completely.
Most assets are owned by big corporations, they are able to automatise first, and eliminate competition (think about automotive industry in past decades), thus people having good in strong corporations will have money, while previous workers, will go without job or money, thus there will be not enough people to buy goods.
Scenario - A riots happen, and the surplus money goes to those who are willing to supress them (with violence), which will periodically reoccur, and make the life miserable for majority of people (think drug wars in mexico)
Scenario - B new financial system is created.
I disagree. For many decisions that the state should make, people's personal preference is only required at the most generalized level. Take health care as an example. Whether people prefer to get one procedure vs another or one medication vs another is irrelevant. They are not the ones who should be making that decision. Studies can be done to look at the incidence rate of different diseases, etc and based on the accepted treatment methods, hospital equipment can be procured. Look at the recent issues with anti-vaxxers... This goes DIRECTLY against the greater good of the community/society.
If you're evaluating whether to build a rail road from A to B or A to C, you can get information based on the hotel occupancy of cities B and C and cross reference the billing address of those staying in those cities. This, in addition to census data showing people with relatives in cities B or C (among other sources of data). We're not living in the 1950s in fear of the USSR and the cold war. We live in the era of big data.. The data exists. People don't know what they want until presented with an option/choice (as you said so yourself). Buyer's remorse tells us that said decision making on the part of the consumer isn't always correct.
Why is this assumed to be an insurmontable problem with zillion calculations? If information is already available in the form of units and apples and ingots and whatnot, you don't need to use an abstract and yet totally uninformative thing as money computations. The problem with private ownership is that this information is occulted. The word says it: private. It means "hidden". Not public.
A socialist context would make the real information (money is just numbers, iron ingots are real) already available to all. Iron, wheels, seats, wood, digging tools, etc.
But what about using a price system that have no *currency*, as modern money is not just an arbitrary quality/quontity measurement tool, but also an *object of trade* that is *linked to not so valuable* (if not completely obsolete in real engineering) material, gold.
What if we use an equivalent of a KWatt/man-hour instead, measuring price directly in energy and human labour devoted to the creation of such product? An equivalent that is only dedicates a price and is NOT an object of trade?
These capitalist assholes don't want answers. Nah. They use this propaganda bullshit to make anyone leaning toward communism question it, just as pretty much all capitalist agitprop is designed to do.
Funny how the soviets were able to achieve one of the fastest industrial and infrastructure development initiatives in the world but apparently we don't know what steel is worth to us?
Not really a fantastic achievement in the midst of mass starvation and privation from basic daily goods.
@@DoritoWorldOrder Thats nonsense, there is bound to be problems with such fast industrialization that raised living standards by alot. The numbers ofr these "genocides" are not only over inflated but you seem to ignore the mass starvation caused by capitalism all over the world which has killed many more
Actually it wasn't, plenty of countries in asia and europe developed at far faster rates than the USSR
@@jonasastrom7422 Their entire economies were developed with western capital, and it is intertwined with the international finance system. These countries primarily have manufacturing for the sole purpose of export to the USA or the West, which is clearly reflected in their foreign policy. The development of the USSR was independent and led to sustained increases in living standards. That independence is quite key, because they do not suffer from international finance crashes (example: Great Depression). You also have to take into account the fact that the USSR was a far larger and expansive country which had to develop from scratch, while "states" like Taiwan Province and South Korea had their industries imported.
Also, these countries that you mention have not been able to sustain increased development in the productive forces, and are on the decline. This is because they cannot sustainably unleash the productive forces, which is contrasted by countries like China where there is ongoing and constant modernization. Countries like South Korea and Japan have populations AND economies which are quite literally declining, which was not even seen in apparent "disasters" like the Soviet Union which was still growing both economically and population wise until it collapsed.
They forgot the part about the railroad company paying off politicians for special favors.
I'm assuming in this scenario, the government is small and restrained enough to prevent "picking winners".
Lars Magnus Samuelsson Svenssonsenn Magnussvensamuelsson Thor
You're fooling yourself if you think Social Democracies are less corrupt. No matter the system, there will always be evil men.
I guess we just gotta wait for Mankind to evolve!
For an example of a total monopoly on electric power, government controlled, look up "Hydro-Québec" in Google. People are very happy with the low prices of electricity. A monopoly with low prices, excellent expertise and good customer satisfaction.
Or, a bureaucrat paying other bureaucrats for special favors. Same thing, but I think that the bigger a system is, the more corruption is inside it (see totally corrupt USSR).
Not if the Clintons have any influence.
StumbleUpon brought me here!
No wonder I don't use that trash anymore.
Pots and pans....Reminds me of Oscar Schindler.
With central planning the reaction to inevitable mistakes causes the problems to compound and then spiral out of control.
the price of the rail line is just one piece, cost of operating on the longer or shorter distance needs to be accounted for
See this seams so simple and yet I think much of the modern world does not understand it
You're simple.
@@fun_ghoul You are the simplest
@@fs1541 Oooh, burn! And so creative!
What about long term costs? The route through the mountain seems shorter, so less fuel would be needed than on the route around the mountain. I think you could just extend the calculation given in the video.
Of course, they were just being as charitable to the socialists as they could. In reality, economic decisions without prices are disastrous as the amount of variables are astronomical. Even in a very favourable scenario as described in the video it still fails. For example we just extend the economic calculation problem to the scarcity of fuel.
@@marcusaurelius45 No, it's not "astronomical". Individual businesses make decisions all the time, not always in terms of accounting numbers (actually, they often look too much at numbers only, instead of real needs of real people), and no one bats an eye, and no one says it's "astronomical".
The whole point is you're taking labor and resources from other places at the same point in time. Seeing how well either choice preforms in the long run isn't the focus. Amd it says in the beginning of the video "assume both options have the same benefit to the nation" there is no difference between the two options besides the initial cost.
@@CaleTheNail In socialism, all the required information is already accessible, that's one of the things that breaks the video's argument. You don't need to rely on abstract numbers that represent nothing in real life.
The capitalist argument also breaks because there is a lot of assumptions and magical thinking. The main one is that by allowing the capitalists to take the decisions by themselves, society magically end up at the best place with optimal consumption of resources. That's a lot of assumptions that are not explained. It's also suspiciously "convenient".
@@Simboiss yep, can't argue with omniscient commissar.
Yes, I would like to buy 1 engineering please.
This is, essentially, the hiring process.
Six words: *diminishing marginal utility of purchasing power*
Ah yes, that's why the USA counts with a wonderful and functional nation-wide privatized rail system... Wait.
If you're trying to argue that Amtrak is efficient... That is just laughable.
@@VictorMartinez-zf6dt Frankly I meant exactly the opposite, I'm mocking the U.S.'s embarrassing rail system.
The US' freight rail system is one of the most extensive and is the most cost effective, yet it's privately operated. Japan has one of the most efficient passenger rail systems in the world: it too is privately owned.
don't forget the cost of upkeep for each option afterwards
They "forgot" all kinds of shit. That was on purpose, because if you take five minutes and explain all that stuff, you don't have an argument left against central planning! LOL
Simple. 1) Hire engineers from countries with excess ones. Exchange the steel you use for trucks to get more of them.
2) Build the railway, going through the mountain.
3) Use the railway to transport goods to the city, the same as the truck would.
So the communist society can only work if a capitalist society also exists for the communist society to use?
You still don't know if that's optimal as much as you would in a free market.
@@memorydancer ok? So you need capitalism? So your philosophy can't work on its own?
@@memorydancer well 1. Don't shift the goalpost from communist to socialist.
2. The ECP still applies to socialist countries.
3. My argument is that capitalism is needed for communism to work per the op
Nice video. Now imagine it in 21st century, with robots, drones, A.I.
Now imagine the 20th century with computers.
Now imagine the 19th century with tractors
Now imagine the 18th century with railroads
Now imaging the 17th century with...
Every time a disruptive technology takes hold, new and often unforeseeable jobs are created with the newly created wealth. And it is always for the better. Being afraid of the impact of robots and the like, is a sort of high order arrogance, that just because you have no entrepreneurial plans that no one else can have such either. The real problem with such change is we have a socialist education system that cannot, even if was meant to, keep up with the demands that are coming down the line, a century behind the times.
for what purpose?
@@nustada Precision: "newly created wealth" *for the rich*
@@Simboiss The rich is a relative term. To the troglodytes any form of betterment is "the rich".
OMG this is crazy
Nah. This makes crazy look sane.
Change a couple of names, and you have a description of the California High Speed Rail project.
Fun fact: In socialist Poland bread was cheaper than grain!! Guess what the pigs and farm animals ate instead of grain? Bread. Socialism simply is a technical impossibility.
The Soviet Union literally had to buy the monthly wall street journal to establish prices.
Yes, and they also looked at the prices on the black market to find out the value of their goods.
Awesome explanation. Only Learn Liberty and take economic concepts down to a simple level and keep it interesting for everyone.
+Ethan Glover Thanks, Ethan!
+Learn Liberty It would have been a nice addition to include also the price of the railroads services, by considering longer delivery times for going around the mountain and how that might affect their customers.
+furtim1 The video only compared two inputs to keep the explanation simple and effective. In the real world, there are hundreds if not thousands of inputs to any one industrial endeavor to consider. All of these inputs' prices effect the bottom line and thus instruct businessmen to make the best use of many different sorts of labor, materials, and technologies.
Of course. The video, though, only compares cost consequences, with no consideration for income consequences. Showing both ends of the deal would have made the video even more effective, I think.
Learn liberty please make a video like this about why there are shortages in a planned economy
+MMM MMM Thanks for the recommendation.
+Learn Liberty when I was younger I used to obsess over why shelves were empty in grocery stores when there was no wars, but the same superpower was sending satellites to space, I never knew of Hayek or the economic calculation problem
+Learn Liberty hey any follow up on this
This is a fantastic video on the role of prices in a market. Sowell talks about the necessary knowledge as "consequential knowledge."
This is exactly what’s going on with California’s high speed rail project: NO ONE ASKED FOR IT!!
Agenda 2030 did