----------------- HES POSTING ----------------- 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 ------------ FOOTER TO HES POSTING ------------ For information, send the message "info HES" to [log in to unmask]