Thursday, January 18, 2007

Libertarian values in action

Said there:

So, according to Jane Galt's logic it would be troubling if one employee was fired while the rest enforced a ONE MILION DOLLAR PER MONTH wage increase. But we can't do that, because it would be soooo unfair to that poor one guy.

To which I say boo fucking hoo!

Employers fire employees daily, while the Jane Galt's of this world applaud their sacred right to increase profits over people and forming contracts as they see fit. Hire and fire, baby, hire and fire.

If Jane Galt is so concerned about the poor guy who lost his job, she can go help trade unions create contracts by which the winners compensate the loosers. You have net gains form trade, why not consider net gains from collective bargaining?

Sunday, September 24, 2006

Wal-Mart as the new Central Planner?

Some comments snatched from here:

Wal-Mart is the wet dream of Communists.

Capitalism was beating Communism, because critical economic information is distributed and a central planner with a pencil and a sheet of paper can not manage it all. So you had to leave that to the local manager/business owner.

Communism did not have the informational tools for administering the whole economy. Wal-Mart increasingly has the computing power to manage a growing share. Integrated supply chain systems and electronic data interchange became popular in business in the 90s.

There was also this article a few years ago about Wal-Mart data-mining their terrabytes of information to better plan distribution and logistics.

One day it will be possible to manage it all from one single CPU farm. It's quite funny, Capitalism will die through its own capitalistic means...

Posted by: Oskar Shapley | Sep 24, 2006 7:50:35 AM


That is a unique observation, insomuch as I have never come cross it before (might not be unique at all, but I certainly liked reading it).

If applied to a national economy it could actually work, if the administrators stuck to efficiency in meeting the demands of their customers, in this case The People, rather than redirecting resources to the whims of how they think things should be.

I have no faith in that happening, but it could.

Posted by: Guy Montag | Sep 24, 2006 8:12:34 AM

Here are several quotes from Hayek, which to my understanding are becoming increasingly OBSOLETE:

"A mind endowed with full information could of course choose every point on the n-dimensional surface that appeared desirable to him andthen distribute as he saw fit the product of the combination he chose. But the only point on (or at least somewhere near) that surface we can reach using a procedure known to us is the one we reach when we leave its determination up to the market."

- Wal-Mart has near full information in it's own domain.

"About many important conditions we have only statistical information rather than data regarding changes in the fine structure."

- Wal-Mart has the data.

"It means, however, that of the combination of different goods that is actually being produced [in the market economy], as much is produced as we can manufacture by any method that is known to us. That is of course not as much as we could produce if infact all the knowledge that anyone possessed or could acquire were available at a central point and from there could be entered into a computer."

Computers in Hayek's time were sloooow and user unfriendly. The data mining tools that Wal-Mart can use now are much closer to Hayek's "mind endowed with full information".

Posted by: Oskar Shapley | Sep 24, 2006 8:25:03 AM

I don't think that managing the economy from one single place is in a good political idea. It puts the responsibility for the outcome on a central planner, who would be the go-to-blame guy for anyone not satisfied by the result. Which would be everyone, because wants are infinite and resources are not. The invisible hand and markets kind of sidesteps that issue by saying that the economic outcome is the result of a uncontrolled process and not the decision of a particular planner, who decided that you are going to be poor.

People in the Central/Eastern European Soviet economies were notoriously protesting against low wages, but it is not easy to say whether the low wages were a result of the wrong system or unproductiveness of the workers. The central authority got the blame anyway.

Here's a link to the Slashdot discussion of Wal-Mart's data mining. The article was in the NYT, but it's behind the paywall now and I can't find a copy .

Wal-Mart's Data Obsession

"The New York Times covers Wal-Mart's obsession with collecting sales data. Fun fact: 'Wal-Mart has 460 terabytes of data stored on Teradata mainframes, at its Bentonville headquarters. To put that in perspective, the Internet has less than half as much data, according to experts.' That much information results in some interesting data-mining. Did you know hurricanes increase strawberry Pop Tarts sales 7-fold?"

Posted by: Oskar Shapley | Sep 24, 2006 9:01:40 AM

Sunday, January 22, 2006


... a very interesting interview with the Deputy SecDef.

Sunday, January 15, 2006

War of the Worlds

I can understand why you all hate WoW so much. It's not a pleasant movie. War movies are entertaining when the hero uses his virtue (knowledge, determination or teamwork) to succeed.

In the movie American's are getting invaded and they can do nothing about it. Their weapons are useless, civilians get fried like ants by towering monsters.

Tom Cruise is not brave. He and his family have to run and hide like rats from the exterminators.

And in the end the aliens lost not because someone made good use of his virtue. They lost because of bacteria... that's so unmanly.

Friday, December 23, 2005

The markets, they solve everything

Stossel embarasses himself again
with his free market religion:

The more I've watched the markets work, the more impressed I've become with how competition solves problems with speed and flexibility rarely seen in government-imposed solutions.

Enron and the other recent business disasters are evidence of the market working. Government regulators didn't discover the deceit. Enron's lies were revealed when private security analysts raised questions and private investors started dumping the stock.

Yes, because the market works at it best when it annihilates multi-billion dollar companies and thousands of jobs. And I've also heard they found the cure for cancer. It's called death.

Thursday, December 22, 2005

Sometimes every problem looks just like a demand curve

Alex Tabarrok is a fine economist, but sometimes the smartest people let routine overtake them. You can not explain every economic problem or the behaviour of a corporation by guessing the shape of its products' demand curve. Not every company is maximizing its short-term profits, sometimes the management is simply after world domination.

Everybody in the business knows that MS is after the market share. XBox is a money loser, they know that.

But they have a 75-80% profit margin on Windows and Office and are sitting on billions of cash. They decided to do what every mature company does to keep growing: expand into other markets, whatever the costs may be. They pour money into several areas: gaming, home entertainment, etc.

If the Department of Justice allowed them, they would give the boxes away for free just to kill off the competition. But that would obviously mean the end of Microsoft, because their competitors would immediately sue their asses and the suit would result in a judge ordering an anti-trust breakup of MS.

So, Microsoft is doing the smart thing: sell the boxes at the lowest possible price that can be justified compared to what the competition does. The profits will come, once the competition's leadership has been weakened financially and falls behind in technology and quality.

Saturday, November 26, 2005

Baumol's symphony orchestra

Prof. DeLong channels Marginal Revolution on the topic of European labor and musical protectionism. Here's my comment:

Let's remember that the symphony orchestra was the original case study for Baumol's cost disease: "Performing Arts: The Economic Dilemma" (1966).

A French musician can not be more productive than a Bulgarian one. His higher wage is (was) only justified by his (no longer) exclusive access to customers who are more productive than the average Bulgarian.

Heilbrun, J., "Baumol's cost disease", Chapter 11 in: Towse, R. (ed), (2003), "A handbook of cultural economics".
Read it: