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Post by Pooh on Oct 29, 2008 17:02:30 GMT
| Why Equilibrium? Supply and Demand balance in a free economy (Samuelson, Fig 4-3, pg 65)
If the Supply (Quantity) of something is greater than the Demand for it at that Price (e.g., a Surplus), then the Price will usually move down.
On the other hand, if the Demand (Quantity) is greater than the Supply (e.g., a Shortage), then the Price usually moves up.
Note (above, reply #3) that if either Supply or Demand shifts, the Equilibrium Point shifts also. (Page 67) |
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Post by Pooh on Oct 29, 2008 16:39:26 GMT
| Supply Curve Shift (after Samuelson, Fig 4-4a, pg 67)
The Supply Curve is not static; it shifts to show the same supply at a lower price with technical and process efficiencies (e.g., personal computers), or a lower supply at a higher price (e.g., refinery shutdown).
As Supply increases (shown as a shift to the right of the blue supply curve), the gray circles to the right represent higher Supply at lower Prices along the green Demand curve.
As Supply decreases (shown as a shift to the left of the blue Supply curve), the gray circles to the left represent the lower available Supply at higher Prices.
For example, as speculators and unqualified homebuyers tried to sell their houses, the supply of houses for sale increased, prices dropped, and builders stopped building. | | Demand Curve Shift (after Samuelson, Fig 4-4b, pg 67)
The Demand Curve is also not static; it shifts because of more potential customers, increased (real) incomes, marketing and preferences.
As Demand increases (shown as a shift to the right of the green Demand curve), the gray circles to the right represent higher Demand resulting in higher Prices along the blue Supply curve.
As Demand decreases (shown as a shift to the left of the green Demand curve), the gray circles to the left indicate that lower Demand results in lower Prices.
For example, when the price of oil reached record levels (and with it, the price of fuel), people drove less and purchased less fuel. (Granted, crude oil is not an entirely free market: OPEC is a cartel, and new supply is restricted by Congressional dictate. Nor was real estate: demand was politically increased by pressure to make mortgages available regardless of income.) |
Corrected ambiguity 10/30/08
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Post by Pooh on Oct 29, 2008 16:25:33 GMT
| Equilibrium Defined: Where Supply Equals Demand (after Samuelson, Fig 4-3, pg 65)
In a free economy, when the Price is right, the Supply will sell out. This position of balance between Supply and Demand (Quantities) is called the “Equilibrium Point”.
At the Equilibrium Point, the Quantity Supplied and the Quantity Demanded are equal, at the same Price. (Remember, this is a concept.)
Note that if either Supply or Demand changes, the Equilibrium Point shifts also. How? See below. |
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Post by Pooh on Oct 29, 2008 16:12:41 GMT
| Demand Curve (Samuelson, Fig 4-1, pg 61-63)
The Demand Curve represents how much (Quantity) of something will be bought at various Prices. It slopes from the upper left to the lower right.
In general, as Price increases, people buy less; so the Quantity sold (Demanded) will be less.
People may substitute a lower priced product for their higher-priced first choice. Or, they may not buy at all.
As Price decreases, people buy more; so the Quantity sold (Demanded) will be more. People may buy more of the product, or upgrade from a lower-priced product. | | Supply Curve (Samuelson, Fig 4-2, pg 63-64)
The Supply Curve represents how much (Quantity) will be produced and offered for sale at various Prices. It slopes from the lower left to the upper right.
Since people make or provide things to make a living for themselves, the Price must at least cover the cost of production plus that “living” (or Profit). If people can’t make a living, they won’t provide it. At lower prices, overall Supply will decrease.
If suppliers make a really fantastic living at it, other folks will try their hand at supplying it. They may go into business, or change the things they produce. At higher prices, overall Supply (Quantity) will increase. |
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Post by Pooh on Oct 29, 2008 6:52:28 GMT
What is this?
"The Politics of 'AGW' " considers the effects of carbon “tax”, “cap” or “credit” solutions to whatever AGW problem may exist. That Topic illustrated the effects of such taxes, using Supply-Demand concepts. This Topic offers a recap of Supply-Demand approach, just in case yours might be a bit rusty. Mine was.
These notes recap the basics in Samuelson (and Nordhaus), in Samuelson, Economics, 12th edition, Chapter 4. It was necessary to reproduce, in Excel, the graphs from their text, because page scans were really murky. Supply–Demand is generally high school level. Credit for development of the argument belongs to Samuelson and Nordhaus; omissions and botches are mine.
In a free market economy, customers are at liberty to decide what to buy (and at what price), and suppliers are at liberty to decide what to produce (and at what price). Per Samuelson, money acts as a “vote” on the desirability of the supplier’s product or service at a particular price.
As an analytical approach, Supply – Demand Curves treat changes (shifts) in only one thing at a time.
10/31/08: See excellent reply by Kiwistonewall in Reply #7
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Post by Pooh on Oct 29, 2008 6:36:35 GMT
In the Global Warming and Weather Discussion, "The Politics of 'AGW' ", we looked at the strong similarity between the Soviet Union's "Turnover Tax" and the various political schemes for taxing carbon emissions. In that Topic, Supply-Demand is used (in Reply #9) to illustrate the Turnover Tax. I committed to post a brief review of Supply-Demand concepts as a refresher. Here it is. The topic is linked here if you care to refer to it. (Right-click, New Tab to keep your place here.)solarcycle24com.proboards106.com/index.cgi?board=globalwarming&action=display&thread=192
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Post by Pooh on Oct 29, 2008 0:01:25 GMT
Agenda: How to stay in power!Don't look for a conspiracy when stupidity is a valid hypothesis! Don't underestimate the power of belief! Politicians use belief as a tool. The more pragmatic they are, the more they dress up in the beliefs of their constituents.People can be sincerely wrong! We see plenty of posters at this board who sincerely believe in CO 2 AGW and hack away at science and data since it MUST be wrong. Probably not a conspiracy; too many people involved to keep a secret. More likely a convergence (or confluence) of Interests that has the same message. Coalition Politics has a long history here in the States. Rote Kapelle comes mind, but that goes too far. It is also unfair to those who are sincere. As to how folks have come to believe that message, one might revisit: Re: Precautionary Principle and AGW - Continued « Reply #3 on Sept 30, 2008, 7:32pm. It is on Sunstein's Laws of Fear. {Right-Click to Open in New Tab to keep your place here}solarcycle24com.proboards106.com/index.cgi?board=globalwarming&action=display&thread=134 I think you do well. In Truth, your approach is praised: "Now the Bereans were of more noble character than the Thessalonians, for they received the message with great eagerness and examined the Scriptures every day to see if what Paul said was true." Acts 17:11 Zondervan, NIV, Thompson's Chain Reference, 1982I also think that all citizens should apply this principle more widely. For that reason, I try to link to or reference a source whenever possible.
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Post by Pooh on Oct 28, 2008 22:06:05 GMT
The Turnover Tax Illustrated(A brief "crib" about Supply-Demand basics in now in the "Open Forum" under "Supply and Demand in Economics 101" )solarcycle24com.proboards.com/index.cgi?board=talkanything&action=display&thread=195&page=1(Right-click the link above and select Open in New Tab to keep this window open.) | Turnover Tax: How It Works (part 1) This is Samuelson�s diagram of the State�s mechanism to limit the people�s consumption (Demand) to that which the State permits (or plans) to be produced (Supply). A few words of explanation about the diagram: The curved line is a Demand Curve. It represents the concept that the higher the Price, the less people will buy.
- �A� marks an Equilibrium Point of a free market, clearing at a Price the customer would pay and Suppliers would charge (about 17 units at a Price of 1.75).
- �B� represents an Equilibrium Point of a command economy; it would clear at a Price some customers would pay if the Supply were limited to �Planned Output� (about 9.5 units at a Price of 4.3).
- �C� represents Reality in a command economy such as the Soviet Union (about 11 units at a Price of 3.4). The planners may leave the price unchanged for years (the five year plan).
However, there is no Supply �Curve�. There is that vertical straight, red line labeled �Planned Output�. It is about 9.5 units of product; no more, no less. | | Turnover Tax: How It Works (part 2) A few more words of explanation: How does the State work this miracle of limiting the Demand to the �Planned Output�? By the State�s favorite mechanism: a Tax. In the Soviet Union, it was called a �Turnover Tax�. This Tax added to the Price over what it would have been in a free market. The �Turnover Tax� was set so as to limit Demand to the �Planned Output�. The Tax was levied against the Producers (Suppliers). Since the Producer was the State, there was no escape: no competing Suppliers, imports, or competition on the basis of quality. Unfortunately, only Climate Change models achieve perfection. When the Tax is set too low (or becomes too low over time or political pressure), the actual Price remains 3.4 (�C�) rather than 4.3 (�B�), but the Supply remains at 9.5 units, not 11 units. This outcome is called a �Shortage�. (We would not wish to break the plan, now would we? The State has guns and gulags.) ;D
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Samuelson, Paul Anthony. Economics (12th ed). New York: McGraw-Hill, 1985. Fig 35-1, pg 772-775
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Post by Pooh on Oct 28, 2008 21:36:39 GMT
Reference: The Turnover Tax in a Command Economy Samuelson and Nordhaus address various forms of planned economies in Chapter 35 of Economics. Among these was the Soviet Economy around 1983 (before its collapse). Samuelson and Nordhaus identified the Soviet Economy as a command economy. The authors identify three “basic economic problems” to be decided for a market economy: What, How and For Whom. They then give the solutions employed in the Soviet economy of 1983. What: “… the allocation of output is a political decision.” “… planners decide on the levels and distribution of consumer goods …, then planners set consumer prices so that demand and supply more or less balance.” (apparatchik) How goods are produced: “In large part, the decisions about How are taken administratively….” “Unlike a market economy, the primary goal of firms in the Soviet economy is not to earn profits. Rather, the major goal is to fulfill the plan.” For Whom: “The entire system is designed to attain the goals of the planners and the ultimate political leaders ….”
As an illustration, the authors invent a conversation about prices between a Western economist and a Soviet economist: (Samuelson, pgs 773 – 774) Western: “How can you run an economy where you don’t know what goods are really worth?” Soviet: “You are completely missing the boat. The whole purpose of planning is to avoid the mistakes of the market. We prefer to have goods that society really needs (as determined by the Communist Party), rather than to devote our economy to the follies of the market …. If we wanted the consumers to be sovereign, we could use the market. But we don’t.”
Samuelson, Paul Anthony. Economics (12th ed). New York: McGraw-Hill, 1985.
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Post by Pooh on Oct 28, 2008 21:25:02 GMT
The Command EconomyOnce we establish the principle, all we can do is haggle over Price. Characteristic | Turnover Tax | Cap And Trade | Carbon Tax | Carbon Credit Card | Tax And Dividend | What: Allocation of resources to output | Allocation of output is a political decision. | Mandates a cap on carbon emissions | Reduce carbon emissions 60% to 80% by 2050 | Carbon emission targets | Mandate carbon emission caps | How: Goods are produced | Planners (Administrators / Bureaucrats) raise Prices by adding a Turnover Tax. Their goal is to fulfill the plan. | Raise the Price; a government agency auctions / allocates carbon emission permits to businesses. Excess allocation may be traded. | Raise the Price by an additional tax on gasoline and “excessive” carbon fuel usage for your “large” home, plus the effects of Cap And Trade. | Everyone gets an allowance, but can buy more. Someone decides how to set each person’s ration. | Raise the Price. Adults get a "dividend", with up to one more for two kids. Large families are out of luck. | For Whom: Whose needs and goals are met? | Attain the goals of planners and the ultimate political leaders. | UN, Politicians, “Climate Change Credit Corporation” | UN, Politicians | UN, Politicians | UN, Politicians | Effect? | Limit Demand by Raising Prices | Limit Demand by Raising Prices | Limit Demand by Raising Prices | Limit Demand by Raising Prices over “allowance” | Limit Demand and families by Raising Prices |
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Post by Pooh on Oct 28, 2008 20:50:30 GMT
Energy Taxes: Political Solutions to Carbon-Driven AGW
Cap-And-Trade: For starters, mandates a cap on carbon emissions. A government agency would auction or allocate carbon emission permits to businesses, who would include it in their price to you. An approximate auction price could be set by (yet another government) computer model. The auction loot goes to a “Climate Change Credit Corporation, a “private-public entity” that would “invest in many things”. (E.g., FannieMay and FreddieMac?) (Senator Lieberman guesses that the market value of all permits would be "about $7 trillion by 2050”.)
Carbon Tax (aka Carbon Content Tax): Representative John D. Dingle (D, Michigan) proposes to tax the “Carbon Content” of certain products, levy an additional tax on gasoline and “excessive” carbon fuel usage in your “large” home. He promises that the scheme would be tightened over time (60% to 80% less emissions by 2050), and that this Carbon Tax will be in addition to Cap-And-Trade. In return, he promises to spend the booty on “Share The Wealth” schemes and sundry good works and purposes.
Personal Carbon Credits, aka Rationing (a U.K. proposal): This is “A system of personal ‘carbon credits’ to meet emissions targets”. Each year, everyone gets an allowance (credit) for carbon-based energy. Of course, someone has to decide how to set each person’s ration. If you exceed your ration, you can buy more from someone (or some country) with a surplus of credits. Such “personal carbon trading” could operate like a credit card computer system.
Tax And Dividend (James Hansen and British predecessors). Hansen proposes a political policy of taxing fossil fuels at their source (extraction or import). In a letter to Barack Obama, Hansen urges this tax on carbon production with a 100% dividend to the public on a "per capita basis". Well, not quite "per head": kids count only half a head each, with a cap of two kids. He calls this policy "progressive" (code name for socialist). Control of the economy is an outcome of "The rate of infrastructure replacement, thus economic activity, can be modulated (a.k.a. regulated) by how fast the carbon tax rate increases." Note that the possibility of a decrease is not mentioned, since carbon has little material effect on climate, and some "citizens" will become dependent wards of the state.
Turnover Tax: You don’t find this Tax in the speeches and the media reports, do you? It expired with the collapse of the Soviet Union. However, Cap-And-Trade, the Carbon Tax, Personal Carbon Credits and even Tax and Dividend have the same effect and operation as the Turnover Tax. These are merely different names for the Turnover Tax in the Soviet Union.
The Democrat Candidate President will have no problem keeping his pledge not to raise Income Taxes. Trillions of dollars will come in through Turnover Taxes, lots of wealth to share. Unfortunately, no one can do anything without energy. Economical alternatives are in the remote future. Everyone will pay the Turnover Tax, whatever its name.
Some will get a bit back under “Share The Wealth”, but the Price of that will be everyone’s Liberty, just as it was in the Soviet Union.
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Post by Pooh on Oct 28, 2008 20:27:58 GMT
Why are we following the Global Warming and Weather Discussion? It’s just a pattern, but lots of us have a hunch that the Sun has something to do with the temperature of the earth. So, we follow the alternate theories and observations. IPCC (politicians) ignore alternative root causes of “Global Warming”, claim incredible levels of certainty about their findings and denigrate skeptics personally. We see U.N., national politicians and media pundits ignore a quiet sun, cooling trends, decadal oscillations in oceans, and the effect of clouds. We also read that no energy alternative is acceptable except those that are unproven, distant, expensive or politically correct. Politicians are not fools. We might suspect that the politicians have an agenda, something hidden up their sleeve. This thread proposes to look up their sleeves.
We owe much to our gracious host VE3EN for providing this Forum. Thank you! ;D
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Post by Pooh on Oct 25, 2008 18:58:12 GMT
| Test: Turnover Tax, a Solution to AGW This is Samuelson’s diagram of the State’s mechanism to limit the people’s consumption (Demand) to that which the State permits (or plans) to be produced (Supply). A few words of explanation about the diagram: The curved line is a Demand Curve. It represents the concept that the higher the Price, the less people will buy.
- “A” marks an Equilibrium Point of a free market, clearing at a Price the customer would pay and Suppliers would charge (about 17 units at a Price of 1.75).
- “B” represents an Equilibrium Point of a command economy; it would clear at a Price some customers would pay if the Supply were limited to “Planned Output” (about 9.5 units at a Price of 4.3).
- “C” represents Reality in a command economy such as the Soviet Union (about 11 units at a Price of 3.4). The planners may leave the price unchanged for years (the five year plan).
However, there is no Supply “Curve”. There is that vertical straight, red line labeled “Planned Output”. It is about 9.5 units of product; no more, no less. | | Test: Turnover Tax, How the AGW Solution Works A few more words of explanation: How does the State work this miracle of limiting the Demand to the “Planned Output”? By the State’s favorite mechanism: a Tax. In the Soviet Union, it was called a “Turnover Tax”. This Tax added to the Price over what it would have been in a free market. The “Turnover Tax” was set so as to limit Demand to the “Planned Output”. The Tax was levied against the Producers (Suppliers). Since the Producer was the State, there was no escape: no competing Suppliers, imports, or competition on the basis of quality. Unfortunately, only Climate Change models achieve perfection. When the Tax is set too low (or becomes too low over time or political pressure), the actual Price remains 3.4 (“C”) rather than 4.3 (“B”), but the Supply remains at 9.5 units, not 11 units. This outcome is called a “Shortage”. (We would not wish to break the plan, now would we? The State has guns and gulags.) ;D
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Samuelson, Paul Anthony. Economics (12th ed). New York: McGraw-Hill, 1985. Fig 35-1, pg 772-775
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Post by Pooh on Oct 25, 2008 6:15:37 GMT
"For every complex problem there is a solution which is elegant, easy to understand and wrong". --attributed to H. L. Mencken ;D
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Post by Pooh on Oct 18, 2008 7:28:49 GMT
The two references above are to web pages. As you know, each is bracketed by URL tags that you placed by selecting the link in your post, and then clicking the 'World' button in the Add Tags row. That displays the web page, but does not display the graph in your post.
(unsure how to post the visuals so they come up in here and update so if any one can help would be much appreciated ;D) Posting Images:I think what you wanted to do was include the graph on the SOI link, so that it would be shown in the post as updated. I think that Kiwistonewall solved the problem by going to the graph on the SOI web page, right-clicking the graph for " Properties". From the properties panel, he copied the Location of the image, which reads "http://www.bom.gov.au/climate/current/soi.gif". and pasted it into his post. Then, selecting the Location just pasted into the post, click the " picture frame" button just to the right of the "World" button in the Add Tags row. This puts a pair of square-bracketed "img, /img" tags around the Location. I have tested .gif and .jpg images successfully. Others may work; haven't tried them. See Open Forum, Forum Functionality Test « Reply #2 on Oct 3, 2008, 6:17pm>>
And if Kiwistonewall found a slick way to do this, my apologies to him and please let us know! ;D
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