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#15061293
Alternative subject title:
Non-classical forms of market rationing

Capitalism isn't supposed to have shortages (at least according to the classical understanding of economics typically taught). If the demand of something outstrips the supply, prices go up. The prices continue going up until a portion of the buyers are no longer able or willing to buy.

However, I've found this is not always really true in reality.

Take housing for example, more specifically shortages of affordable housing in certain high-price areas.
You have a large pool of people who all have about the same income (more or less) and they are all clamoring to rent the limited number of housing situations they can afford.

Now it's true the demand-price interaction comes into play a little bit, but that's not really a good full description of what's happening here.
When you have a group of 10 people, all can only afford about $700 a month, and only 6 housing units, what's going to happen?
Well, a few of those people are really really going to want to get that housing so they might be willing to pay $750. But anything over $700 is going to be a big stretch for them.
So to some extent, the individuals who get the housing out of this low income group is not going to be determined by their incomes but by who is willing to suffer the most, taking a big cut into their personal budget, or those types of things.
But the reality is that a small increase in price is going to be a much bigger strain for the one paying the money than it is for the one renting out the housing. (That is a price increase of $700 to $750 is going to be a much bigger inducement for these people to decide they can't afford housing, whereas that same price increase from $700 to $750 won't be that much of an inducement for the one renting out the housing, comparatively.)

In classical economics, we usually see an intersection of supply and demand which look both like curves, going diagonally up in either direction. So naturally it's easy for quantity to move in either direction depending on price. But here we have a demand curve that suddenly seems to drop off after a certain price, almost at a right angle, and a supply curve that barely changes with change in the price, at least in the particular area we're looking at.

In this situation, it's practically going to be like a game of musical chairs. First come, first serve. Who gets the scarce housing is in large part going to be determined by random chance. Not really all that different from other forms of government rationing in non-market situations.

Adding more low income people looking for housing might not really increase price all that much. What it will do is decrease the chance that any particular low income individual will be able to find housing that they can afford.

Indeed, this is probably going to lead to what are termed "market inefficiencies" because these people are going to try to immediately jump on any housing opening they see (before someone else can get it) without taking into consideration whether that particular housing situation is really going to be the best fit for them as an individual. (This is especially true when it comes to shared living and roommate situations)

This type of phenomena can also lead to housing providers or employers being extremely picky about which candidates they choose, since they have plenty of different candidates to choose from, and whomever they choose the price points will be nearly the same.
Individuals with certain qualities going for them might be much more likely to get the jobs or housing, since price may not be the determining factor in deciding which candidate gets chosen. One could describe these attributes as intangible qualities. Still a form of market rationing but not all of the price is paid in money (if you want to view it that way).
One example might be an employer who is looking to hire a secretary. Two female applicants apply, both requiring the same amount of pay, but one is more attractive than the other.
#15061310
Rancid wrote:lol whut?

I stopped reading right here.

I think he simply means that according to neoclassical economics, the demand and supply for a given good or service will always be equal at equilibrium. In that limited sense, he is correct. However, you only need to consider famine conditions to realise how autistic this is. During a famine, the supply of food decreases. The need for food remains the same, of course, but because there is less food to go around, the price goes up. This has the effect of rationing the food out to those who can afford it. Those who cannot afford it, of course, starve to death. At all times, the market is free and is at equilibrium, and the demand and supply of food are always equal, so that there was never a 'shortage' of food. Yet many, many people will have starved to death. Why? It is because of the abstract and one-sided definition of the word 'demand' in neoclassical economics. The need of the starving people for food never shows up as a demand in the marketplace, for the very good reason that they have insufficient money to buy any. In that situation, most functioning human beings would say that there was a 'shortage' of food, since the streets are now littered with emaciated corpses, but a neoclassical economist would deny that there had ever been any shortage of food, since all demand for food in the marketplace was satisfied with a supply of food. QED.
#15061314
Potemkin wrote:I think he simply means that according to neoclassical economics, the demand and supply for a given good or service will always be equal at equilibrium. In that limited sense, he is correct. However, you only need to consider famine conditions to realise how autistic this is. During a famine, the supply of food decreases. The need for food remains the same, of course, but because there is less food to go around, the price goes up. This has the effect of rationing the food out to those who can afford it. Those who cannot afford it, of course, starve to death. At all times, the market is free and is at equilibrium, and the demand and supply of food are always equal, so that there was never a 'shortage' of food. Yet many, many people will have starved to death. Why? It is because of the abstract and one-sided definition of the word 'demand' in neoclassical economics. The need of the starving people for food never shows up as a demand in the marketplace, for the very good reason that they have insufficient money to buy any. In that situation, most functioning human beings would say that there was a 'shortage' of food, since the streets are now littered with emaciated corpses, but a neoclassical economist would deny that there had ever been any shortage of food, since all demand for food in the marketplace was satisfied with a supply of food. QED.


Ah but more food exists for the people who survive, and the Rich always, with fewer mouths to feed. These are people who obviously lost out in the Darwinian struggle for existence due to their dysgenic genes and thus obviously got what was coming to them. All accounts are settled and all is well with the worshippers of the Golden Calf...
#15061315
@Potemkin

Potemkin wrote:I think he simply means that according to neoclassical economics, the demand and supply for a given good or service will always be equal at equilibrium. In that limited sense, he is correct. However, you only need to consider famine conditions to realise how autistic this is. During a famine, the supply of food decreases. The need for food remains the same, of course, but because there is less food to go around, the price goes up. This has the effect of rationing the food out to those who can afford it. Those who cannot afford it, of course, starve to death. At all times, the market is free and is at equilibrium, and the demand and supply of food are always equal, so that there was never a 'shortage' of food. Yet many, many people will have starved to death. Why? It is because of the abstract and one-sided definition of the word 'demand' in neoclassical economics. The need of the starving people for food never shows up as a demand in the marketplace, for the very good reason that they have insufficient money to buy any. In that situation, most functioning human beings would say that there was a 'shortage' of food, since the streets are now littered with emaciated corpses, but a neoclassical economist would deny that there had ever been any shortage of food, since all demand for food in the marketplace was satisfied with a supply of food. QED.


In my view, it is poverty that causes obesity in capitalist societies. I live in a capitalist society and there is plenty of cheap food available for the poor. It's not healthy, but it's better than starving. Part of the reason why we have an obesity problem here in the US is the abundance of food and it's all in your face. If you live in poverty in my society, then you are more likely to be obese given that the cheap food is unhealthy and thus is a major contributing factor towards obesity. It is in my view, that instead of starvation being linked to poverty in my capitalist society, it is rather the opposite. That poverty and obesity is linked instead. Whereas those who are wealthy have the money to afford healthy high quality food and thus will not be obese and will be more healthier and have less health problems because they can afford to purchase more expensive healthy food.
#15061317
Politics_Observer wrote:@Potemkin



In my view, it is poverty that causes obesity in capitalist societies. I live in a capitalist society and there is plenty of cheap food available for the poor. It's not healthy, but it's better than starving. Part of the reason why we have an obesity problem here in the US is the abundance of food and it's all in your face. If you live in poverty in my society, then you are more likely to be obese given that the cheaper food is unhealthy and thus is a major contributing factor towards obesity. It is in my view, that instead of starvation being linked to poverty in my capitalist society, it is rather the opposite. That poverty and obesity is linked. Whereas those who are wealthy have the money to afford healthy high quality food and thus will not be obese and will be more healthier and have less health problems because they can afford to purchase healthy food.


There are very few ''Poor People'' as such in North America and Western/Central Europe and the Anglosphere in general, a few other places. There are a ''Golden Billion'' and the rest are pretty bad off.
#15061319
@annatar1914

annatar1914 wrote:There are very few ''Poor People'' as such in North America and Western/Central Europe and the Anglosphere in general, a few other places. There are a ''Golden Billion'' and the rest are pretty bad off.


That's one way of looking at it. We are pretty darn fortunate.
#15061385
Potemkin wrote:I think he simply means that according to neoclassical economics, the demand and supply for a given good or service will always be equal at equilibrium. In that limited sense, he is correct. However, you only need to consider famine conditions to realise how autistic this is. During a famine, the supply of food decreases. The need for food remains the same, of course, but because there is less food to go around, the price goes up. This has the effect of rationing the food out to those who can afford it. Those who cannot afford it, of course, starve to death. At all times, the market is free and is at equilibrium, and the demand and supply of food are always equal, so that there was never a 'shortage' of food. Yet many, many people will have starved to death. Why? It is because of the abstract and one-sided definition of the word 'demand' in neoclassical economics. The need of the starving people for food never shows up as a demand in the marketplace, for the very good reason that they have insufficient money to buy any. In that situation, most functioning human beings would say that there was a 'shortage' of food, since the streets are now littered with emaciated corpses, but a neoclassical economist would deny that there had ever been any shortage of food, since all demand for food in the marketplace was satisfied with a supply of food. QED.


Sure, sure sure sure. Still, as you pointed out, you'd have to limit/control the scope of the concept of supply and demand to make that statement true. Ultimately, it's impractical to strictly think of it in that manner.

More to the point, what consortium of capitalists (not anti-capitalists) have actually made the claim that "there can never be shoragtes under capitalism?". This is why I stopped reading at the opening statement. Which reasonable (whatever reasonable means) capitalist actually believes that shit? The OP was just setting up a fake/unrealistic premise (i.e. bullshit).
Last edited by Rancid on 24 Jan 2020 13:51, edited 4 times in total.
#15061386
Puffer Fish wrote:People's attention spans are so low, and the level of mental laziness so acute, in these forums, sometimes I wonder why I even bother posting.


Your opening statement was stupid. Plain and simple. There was nothing redeeming in it. If the opening statement was that bad, it wasn't worth reading the rest of it.

It's not laziness, it's efficiency. In other words, I'm filtering your bullshit and saving my time.
#15061397
Rancid wrote:Sure, sure sure sure. Still, as you pointed out, you'd have to limit/control the scope of the concept of supply and demand to make that statement true. Ultimately, it's impractical to strictly think of it in that manner.

It's intellectually lazy, but also politically very useful. After all, if there can never be any shortages under capitalism by definition, then the critics of capitalism are clearly just deluding themselves. Lol.

More to the point, what consortium of capitalists (not anti-capitalists) have actually made the claim that "there can never be shoragtes under capitalism?". This is why I stopped reading at the opening statement. Which reasonable (whatever reasonable means) capitalist actually believes that shit? The OP was just setting up a fake/unrealistic premise (i.e. bullshit).

I suspect the OP has simply misunderstood neoclassical economics. After all, it wouldn't be the first time that the adherents of a theory have misunderstood and vulgarised it.
#15061401
Potemkin wrote:but also politically very useful


Yes yes yes, I understand. You are right.

This is precisely why I'm calling the OPs post bullshit. It's political, it's not objective, it's not academic, and he's trying to pass it off as such. The irony here is that @Puffer Fish called me intellectually lazy, when it is really he who is being lazy.
#15061456
Politics_Observer wrote:@annatar1914



That's one way of looking at it. We are pretty darn fortunate.


Fortunes, personal fortunes that is, have everything to do with it. We in the Western Civilization are generally far better off because the resource-stripping of much of the rest of the world to feed our consumer and service-driven economies. But that's less and less the case as the factories are going overseas also, paying workers cheaply in those lands and perversely destroying the Middle Class here... The very Class that is expected to buy the goods and services. It's a feedback mechanism-the crisis of over-production comes into play at that juncture-that ends in the vast wealth of 10% of the world and grinding misery for the other 90%. At that point Civilization will likely end.

Socialism, or Barbarism.
#15061541
Patrickov wrote:I thought they are essentially the same?


You thought wrong. Wrong in your heedless and unwise slavish imitation of modern western thought, the political and socio-economic thoughts which will lead to the destruction of civilization and the cutting off of the greater part of mankind if it is not stopped.
#15061545
annatar1914 wrote:
You thought wrong. Wrong in your heedless and unwise slavish imitation of modern western thought, the political and socio-economic thoughts which will lead to the destruction of civilization and the cutting off of the greater part of mankind if it is not stopped.


I admit I made a statement a bit too quickly.

I saw the sentence "Socialism or barbarism" being after the sentence "civilization will likely end", so I assume the implied meaning is that socialism is comes after the end of civilization, and thus not part of civilization (barbarism is obviously not civilization).
#15061546
Patrickov wrote:I admit I made a statement a bit too quickly.

I saw the sentence "Socialism or barbarism" being after the sentence "civilization will likely end", so I assume the implied meaning is that socialism is comes after the end of civilization, and thus not part of civilization (barbarism is obviously not civilization).


No problem. But yes, it's either Socialism or Capitalism will lead to Barbarism, to the end of Civilization in the war of all against all for dwindling and finite but essential resources.
#15061548
annatar1914 wrote:No problem. But yes, it's either Socialism or Capitalism will lead to Barbarism, to the end of Civilization in the war of all against all for dwindling and finite but essential resources.


Admittedly I am less confident in socialism because it seems not successfully implemented so far.
#15061552
Patrickov wrote:Admittedly I am less confident in socialism because it seems not successfully implemented so far.


That's human greed and selfishness for you, it is a hard struggle to implement anything in the interests of the common good, (not just the interests of private wealth and birth and connections), much less something like Socialism.

But surely it's important to try to make the human condition a little better, isn't it?
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