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From: Romain Kroes <[log in to unmask]> argued:
> Now, the question is: why does it remain a resulting overproduction
> or overcapacity of production (and therefore something to be regulated by
> the market), while every firm does its best at reducing its costs and
> producing quantities in accordance with market inquiries?
Game Theory suggests an explanation that overcapacity is useful as
a threat (to increase suddenly the production if some dangerous competitors
enter) and/or as option value (if market conditions improve or competitors
'retreat'). The Nash-optimal solution is that overcapacity is built but not
used, and competitors lurk but stay away from markets strongly dominated by
others.
One has to build a dynamic model with at least two periods, to represent
inertia and irreversibility in the building of physical capital.
For the same reason, nuclear weapons were useful although not used for 55
years.
Firms produce 'in accordance with market inquiries', but those market
conditions are largely shaped by those same firms, by Marketing towards
customers and suppliers, and their interactions between them.
We're discussing a typical oligopoly here, not ideal perfect competition.
> This paradox shows that the expression "market economy" does not refer to
a
> normal stable reality, but to a disease. In all probability : the
financial
> crisis that undermines the occidental World System, despite some
remissions,
> since the sixties. Someone wrote: "it has been the Soviet Union, but
now?".
> Now? People's fate, in former soviet empire, is much worse than twenty
> years ago. And this, for having swaped an utopia for another.
>
> Romain Kroës
This speaks more of the hypocrite, formerly 'socialist' potentates who
publicly agitated for 'free markets' while actually doubly corrupt: they
weakened the defense of the State's wealth, then offered as intermediaries
to steal that wealth and 'privatize' it to foreigners at ridiculously low
values.
And all for very small commissions (at macroeconomic scale), but surely
significant for their small-group welfare. A very inefficient, roundabout
way to steal. Our problem is there isn't a strong, credible enough 'Civil
Society' to organize something to stop the mafias.
Do you imply that the poor former soviet 'peoples' have the power to
finance and publish dozens of books in Romania ? or some other lobby
group that feels this will be a politically rewarding (for them) idea to
spread ?
Or more, do you imply that a similar, deeper and subtler hypocrisia
exists in the Western world too ?
Mircea
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