"Time Will Run Back" - A Novel About the Rediscovery of Capitalism

Discussion in 'Markets & Economies' started by mmm....shiney!, Dec 24, 2016.

  1. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    It was in the context of a stagnating or decreasing economy. In a growing economy he argued that profits would come from consumers, but only until the point in time that productivity costs rose or wages rose.

    I'll find the page number and would be keen to hear your interpretation. I had to read it a number of times before i got some grasp of the concept.
     
  2. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Change that, he was referring to just a stationery economy. I'm reading the Kindle edition, ch 37 page 305 of 369.
     
  3. bordsilver

    bordsilver Well-Known Member Silver Stacker

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    There are many nuances in that chapter. At heart Hazlitt was trying to explain why profits are beneficial to the efficient functioning of the market.

    The stationary economy (as opposed to the economy of stationery ;) ) is a fleeting mental construct to highlight that profits made by one entrepreneur aren't made at the expense of workers. Rather they are made at the expense of other entrepreneurs. As per my example, however, the reallocation of resources/profits between the competing producers is still welfare enhancing for consumers.

    The chapter has strong similarities to L.V. Mises' paper Profit and Loss (but is much more condensed).

    One of the key things Hazlitt is trying to debunk is the notion of "excessive profits" that arise in competitive markets. As Mises said (I forget in which book) "Profits go to those that satisfy the most urgent wants of the consumer not yet met in the most useful and cheapest way". This is a desirable thing.

    PS I liked Hazlitt's description that it is not a "profit" system, it is a "profit-seeking system".
     
  4. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    :) Yet that view is absent in much of our economic conversations.

    From the MSM, an article about the proposed sale of Woolworths service stations to BP.

    http://www.news.com.au/finance/mone...e/news-story/2675803bc981c83df948d743e3cca0e7

    Profits determine where enterprisers allocate scarce resources. If a business is making huge profits, it is allocating scarce resources to the provision of products that are highly valued by consumers. Other enterprisers see this and divert their resources from lower valued production to those areas that meet the higher valued needs and desires of consumers. As more competition enters the market or productivity improvements made, profits decline, prices drop down to a point that it is no longer economical for some enterprisers to remain in the industry ie their return is less than their outgoings or they can get better returns elsewhere and close up.

    Low profits are not ideal. They do not indicate whether scant resources are being used wisely or not, all they indicate is that there is very little margin in the enterprise for the entrepreneur. Losses, by which i assume the author means "negative profits" are not a bad thing at all for consumers. They are an indication that the entrepreneur has misread the market, or doesn't possess the skills to value add and meet consumer demand. They are a signal that consumers prefer another entrepreneur's product to the unprofitable one. Remaining in business whilst suffering losses wastes scarce resources that could be diverted to other more profitable ventures that better consumer demand. Closures may result in loss of competition, but if there are no regulatory hurdles to prevent other entrepreneurs from entering the market, any pain experienced by consumers as prices rise should eventually be alleviated as the market attempts to return to an state of equilibrium.

    The Masters Hardware collapse was probably a result of the failure of entrepreneurial calculation. The CEO and Boards of Woolworths called it wrong, spent $millions on constructing commercial premises and buying stock, and experienced losses. All they really did was waste money and resources in the end and hand their losses to Bunnings. The best decision that the Woolies board made was to close their Masters chain.

    Low profits are no more "ideal" than high profits, but it's important to understand that losses are an integral part of an effectively functioning market.

    https://mises.org/library/social-function-profit-and-loss-accounting
     
  5. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Tying together what seems to be a common talking point in most of the libertarian and capitalism threads, the function of the law, from Chapter 39.

    *my emphasis
     
  6. bordsilver

    bordsilver Well-Known Member Silver Stacker

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    Adding the previous sentence to my quote from Mises:
    (I have had this quote on my whiteboard for the past few years because it is so good.)
     
  7. IanPayne

    IanPayne New Member

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    I know this thread is oldie, but I really like the novel which you are talking on this thread!
     
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  8. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    I’m glad you bumped this thread. Hazlitt’s novel is a great read indeed.
     
  9. ZoeSkinner

    ZoeSkinner New Member

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    Indeed the topic is amazing! While studying economics and this bullshit because my parents decided that is the best choice for me, I was looking for all libraries and websites to find books about some topic, one of it was about the capitalism and the idea of consumerism, and all this stuff. What I want to say is that I have never understood this ideology, I don't like capitalism because people are fools about selling and buying. But, when do we live our lives? After I graduated I decided to change something in my life and focus on what appeals to me, for example to read light novel. For me, Japanese culture is smth appropriate to my soul, by reading their novels I'm like living this life.
     

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