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Mike | Abundance 🌟 pfp
Mike | Abundance 🌟
@abundance
whenever I hear people say that "markets are efficient" I want to ask them how efficient is it for the economy when potential Einsteins and Feynmans work as Uber drivers instead of spending that time moving humanity (& the economy) forward? The truth is that markets are only efficient when the product people make capture value (people make money in exchange for creating value for others). But most of the things that would have the greatest impact on people's lives cannot capture value within the economic structures we have today. So Einsteins and Feynmans work as Uber drivers, waiters, or hedge fund managers. And instead of making our lives 10X better they're stuck in a system that increasingly centralizes power and control within the hands of those who play the extraction game better. This doesn't mean that the situation is hopeless by any means. It just means that we need to stop being complacent about so called "economic efficiency" and start building better systems
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Trigs
@trigs
Markets are efficient at moving capital. That's it. That's all they do. Everything else is on the social layer to design systems that promote things we want to be promoted.
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Mike | Abundance 🌟 pfp
Mike | Abundance 🌟
@abundance
But in what sense are they "efficient" then? Economics 101 says purpose should be efficient use of resources (both labor & material). Capital should be an accessory to that, no?
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Trigs pfp
Trigs
@trigs
Efficient use of resources for what tho? That's my point. The current social/regulatory environment encourages markets to activate resources to utilize the available materials and labor to move more capital upwards to those at the top that are positioned to capture the value creation. Markets are seemingly efficient at doing this. They could be perfectly efficient at moving capital more laterally, but that's not how the social layer has structured them to work. I dunno, maybe I'm looking at the term efficiency wrong. I guess what I'm getting at is that "efficiency" is unbiased. A system can efficiently do things that are not in our collective best interests. Just being efficient doesn't mean virtuous or even valuable. Perhaps you're making a different point that is getting muddied by the context of my point! 😆
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Mike | Abundance 🌟 pfp
Mike | Abundance 🌟
@abundance
Econ 101 says we have unlimited "wants" but limited resources. And so efficient (or Pareto efficient) use of resources, means maximizing those wants within the given resources. Markets - given certain conditions like perfect competition, perfect info, no externalities and rational actors - are supposed to result in this efficiency. My argument is that, even given our "imperfect" markets (and without falling into tautological reasoning), are nowhere near as efficient as the theory suggests. Markets underutilize "labor" because the most efficient use of such labor ("Einsteins & Feynmans" in my example) - ie what would produce a much greater maximization of "wants" given same labor - doesn't result in value capture in the market. It's not that capitalist capture this value instead. No one does.
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Trigs pfp
Trigs
@trigs
Yeah I think it's just the difference of using the term "efficient" in some specific economics terminology, like Pareto efficiency! vs just a more common definition that a system's output has little waste from its inputs. The current system, I'd say, is pretty efficient at converting our labor into wealth. It just is terrible at distributing it in an egalitarian manner. That's where welfare economics comes in, and I think the definition of efficient you're speaking to?
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Mike | Abundance 🌟 pfp
Mike | Abundance 🌟
@abundance
Maybe an example can help clarify my point. Let's say we have 100 people in the economy, and these people only care about having homes, cars and independent journalism (as their "wants"). The way the market works today, with the resources available, the market produces 40 homes, 80 cars, and no independent journalism (we're not even talking about how these homes/cars are distributed, bc 1 guy likely has 20 of these homes..). The claim by propenents of the existing paradigm then is that given the limited resources this is the most efficient use of these resources to satisfy the most "wants." My argument is that it's actually possible to produce 400 homes, 800 cars, AND independent journalism if only the economy used labor more efficiently - ie. if people maximized their potential thru research & otherwise (which the economy can't price) instead of doing menial work. Perhaps "effectively" is a better term, but it's not a common term in economics. I'm not even touching the egalitarian aspect at this point
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