The Kudzu Curse

[Darrell Hougen]

Hi Folks,

Here is another great piece by Bill Whittle on PJTV. "Bill Whittle takes PJTV viewers to San Diego for his speech to the Lincoln Club. Can anything stop the unbridled growth of government?"

I found it inspiring as well as being a great introduction to the concept of free trade.

Darrell

[Selene]

Hi Folks,

Here is another great piece by Bill Whittle on PJTV. "Bill Whittle takes PJTV viewers to San Diego for his speech to the Lincoln Club. Can anything stop the unbridled growth of government?"

I found it inspiring as well as being a great introduction to the concept of free trade.

Darrell

That is what objectivism lacks - great public speakers. His voice range was quite narrow, but within it with a pure passion that he kept just on the verge of explosiveness was superior rhetorical work.

Thanks.

I like PJTV a lot.

Adam

[Mikee]

That was great. Thanks for the link.

[syrakusos]

That is what objectivism lacks - great public speakers.

Well, there is a dilemma there. On the one hand, we judge the ideas, not the speaker or writer. On the other hand, I have to agree that it is ironic that as Ayn Rand believed in the unity of mind, body, and spirit, many of the villains in her fiction talk like Leonard Peikoff.

Also, actually, I am a pretty good public speaker with lots of practice and lots of training, but, alas, with that midwest nasal tenor that is so annoying.

[tjohnson]

Hi Folks,

Here is another great piece by Bill Whittle on PJTV. "Bill Whittle takes PJTV viewers to San Diego for his speech to the Lincoln Club. Can anything stop the unbridled growth of government?"

I found it inspiring as well as being a great introduction to the concept of free trade.

Darrell

I don't understand what he means when he says the 2 traders (the spear and the basket) go away wealthier and that wealth is created in the transaction. If, by some standard, the basket and the spear are of equal value then their net worth is exactly the same before and after the transaction. That is not to say that there are not real benefits of trading, obviously, but this is not a proper statement of affairs, IMO.

Edited January 4, 2010 by general semanticist

[Brant Gaede]

Hi Folks,

Here is another great piece by Bill Whittle on PJTV. "Bill Whittle takes PJTV viewers to San Diego for his speech to the Lincoln Club. Can anything stop the unbridled growth of government?"

I found it inspiring as well as being a great introduction to the concept of free trade.

Darrell

I don't understand what he means when he says the 2 traders (the spear and the basket) go away wealthier and that wealth is created in the transaction. If, by some standard, the basket and the spear are of equal value then their net worth is exactly the same before and after the transaction. That is not to say that there are not real benefits of trading, obviously, but this is not a proper statement of affairs, IMO.

The created wealth is that each gets what he wants. That's why tariffs destroy or absorb wealth by interfering with trade. This is different than the creative destruction of capitalism. Intrinsic value is a myth; everything is subjectively valued in economic transactions, even gold. If I'm the last man on earth and have access to Ft. Knox I'm going to the PX, not the gold vault.

--Brant

[merjet]

I don't understand what he means when he says the 2 traders (the spear and the basket) go away wealthier and that wealth is created in the transaction. If, by some standard, the basket and the spear are of equal value then their net worth is exactly the same before and after the transaction. That is not to say that there are not real benefits of trading, obviously, but this is not a proper statement of affairs, IMO.

He doesn't say comparative advantage, but likely implicitly appeals to this well-known economic principle.

Edited January 4, 2010 by Merlin Jetton

[syrakusos]

I don't understand what he means when he says the 2 traders (the spear and the basket) go away wealthier and that wealth is created in the transaction. If, by some standard, the basket and the spear are of equal value then their net worth is exactly the same before and after the transaction. That is not to say that there are not real benefits of trading, obviously, but this is not a proper statement of affairs, IMO.

The key concept is marginal utility.

If you and I each have a new unsharpened #2 Ticonderoga Pencil, then there is no reason to trade. The threshold has not been crossed. Equivalence is not enough potential. In order for trade to take place, each must gain something they did not have before. When each gains what they did not have before, each has more than they did before.

In terms of labor, in the example offered, if the Guy Tribe makes three spears a day or three baskets a day but the baskets are poor quality, they will trade a spear for a basket -- regardless of how long it takes the Woman Tribe to make their superior baskets, 3 a day or 30. Similarly, the Women can get great spears better than their home products and are willing to trade -- regardless of the "cost" to the Men: the Women could care less. All they want is spears better than their own in exchange for baskets.

Novelty is also a value. You might exchange one "equivalency" for another, if the one you get is new to you in some way, just for the novelty. Again, you are ahead for having something you did not have before. The items can cross a boundary because they have the potential of inequality.

To say that a my car is"worth" $25,000 and your boat is "worth" $25,000, therefore we can trade is to miss the salient point: utility. A great many things may be "worth" $25,000, a huge quantity of used aluminum foil or spec of a rare earth. If you have no use for them -- "use" including the ability to trade them for something else -- then they are worthless (or at least, worth less) to you.

I put "worth" in quotes because in daily life, we might establish that by reference to a common source, some Yellow Book or Black Book, published by the Land and Water Dealers Association. But those numbers are never a promise to buy or sell at that price. When your daily paper prints the stock market prices -- or even if you get them online -- they are only indications of what other people thought. You might have different needs and expectations entirely. It is a common fallacy of socialist economics that price is an objective statement of value.

Moreover, what I paid for something (how long it took me to make it, essentially) is irrelevant to your context. You will only take what I have to offer if you want it more than you want what you already have. Me, too. So, in trading, we both profit by gaining something of greater value.

Again, think of it in terms of energy: at equal potentials, there is no transfer.

[tjohnson]

I can appreciate that obtaining something new that I can use for new purposes has real advantages, but I object to the phrase 'creating wealth' out of thin air just because there was a trade. My idea of 'creating wealth' is more like what happens when you use your brain (and the brains of others before you) to take advantage of natural processes, like agriculture or finding oil and gas, for example. One day you have to go out and cut and split a cord of wood and haul it into the house and burn it - the next day you turn on your thermostat and relax while the furnace kicks in. now you have time to pursue other things - that's my idea of 'wealth'.

[syrakusos]

} ... My idea of 'creating wealth' is more like what happens when you use your brain ... and relax while the furnace kicks in. now you have time to pursue other things - that's my idea of 'wealth'.

Just so, GS! That is indeed how wealth is created. The same thing happens when you trade to mutual advantage -- i.e. an uncoerced exchange -- you are each gaining an advantage. The presentation on Kudzu mixed the two cases because the Republicans in the audience knew all of this. It was not school; it was church.

Take the case of the Spears and Baskets. Both tribes make both products, but the spears of the men are better than the spears of the women; and the baskets of the women are better than the baskets of the men. (THe Freudianism here is amusing. Those Republicans: so repressed!) Clearly, even if the time and materials invested in all cases are the same, the exchange of baskets for spears brings new benefits to each tribe. The men can now carry water (or babies) in their tight new baskets; the women have long straight hard powerful spears with which to penetrate game on the hoof. Each is wealthier than before, free to pursue other things.

The classic statement is Ricardo's Law of Association. If England and France both make beer and wine, but France's wine is better and England's beer is better, then it is to their advantage to trade rather than to subsidize the inefficient production of the inferior product. By re-allocating the resources formerly invested in inefficient production, they gain new wealth. In fact, if they just stop producing at a loss, they gain.

Creating wealth "out of thin air" comes from the bookkeeping. The value (to you) of the goods acquired is greater than the value (to you) of the goods tendered. The extra value can be allocated to some other account. This is true for both parties in a voluntary exchange.

Edited January 5, 2010 by Michael E. Marotta

[tjohnson]

I read the wiki entry that Merlin linked to about comparative and absolute advantage, didn't see anything about the "law of association". Anyway, I get it that certain people are better at doing certain things and it pays to let them specialize at what they do best

[merjet]

I read the wiki entry that Merlin linked to about comparative and absolute advantage, didn't see anything about the "law of association". Anyway, I get it that certain people are better at doing certain things and it pays to let them specialize at what they do best

The "law of association" is another, less common, term for "comparative advantage" (source). The Wikipedia examples are based on quantitative differences, but the principle could be extended to qualitative differences using prices.

It seems to me that "cooperative advantage" would be a better term than "comparative advantage."

Edited January 5, 2010 by Merlin Jetton

[syrakusos]

Anyway, I get it that certain people are better at doing certain things and it pays to let them specialize at what they do best

Your first reply was that you did not see how wealth could be created by the exchange of equal values. Do you still have that objection?

[tjohnson]

Anyway, I get it that certain people are better at doing certain things and it pays to let them specialize at what they do best

Your first reply was that you did not see how wealth could be created by the exchange of equal values. Do you still have that objection?

I think trading can be part of the process of creating wealth, yes.

[teloscientist]

My idea of 'creating wealth' is more like what happens when you ... go out and cut and split a cord of wood and haul it into the house and burn it ...- that's my idea of 'wealth'.

I think you are speaking to an essential issue of wealth, trade, and value. Is wealth "stuff" or is wealth the capacity to fulfill our values/goals?

Example: I have two pieces of paper. John has two pencils. I trade John 1 piece of paper for one pencil.

Conclusion: I suggest that John and I are both richer, even though no new objects come into existence.

Example: I am hungry. My refrigerator is empty. Someone shows me that the plants in my back yard that I thought were weeds are actually valuable food. I both eat some of the plants, and sell them to others, making money to buy more food. I give the person who showed me that it was food some of that money.

Conclusion: The information was wealth in my hands, but not for people who don't have that plant in their yard. Simply providing information creates wealth, even if it doesn't require work.

Values are always valuable to someone for something. Wealth is simply our ability to achieve our values. We can "create" wealth simply by learning or trading for knowledge, or by trading something which is more valuable to you than me, for something that is more valuable for me than you.

That is what Bill was speaking to. It might be different than how you were originally thinking about "creating wealth. Or you might recognize, now that you think about it, but this is a stellar example of creating wealth. If it is not "creating wealth," I'm curious what you would call it. A rose by any other name smells just as sweet, but shared vocabulary allows for sharing knowledge about gardening and higher level…

Edited January 9, 2010 by teloscientist