Completing my short course in economics

Pilot Mechanical Pencils

The first half was my post on Value added and public spending. Growth only occurs where the value of what is produced is greater than the value of the resources that have been used up during production. There was a time when everyone understood that, even economists. Alas no longer. But there is a second element that matters, and that is the price mechanism. Unless you have a functioning price mechanism, where market prices reflect relative scarcity, you cannot tell what anything actually costs.

Which brings me to this: I, Mechanical Pencil: Why a socialist economy can never work. There you will see why the price mechanism matters and how crucial it is that the prices in the market are actually set by people who are trying to earn a living from what they sell. This is what I say about the price mechanism:

This is so important that almost nothing is as crucial as this for ensuring our prosperity continues. Without a functioning price mechanism, in which businesses set their own prices for themselves without government involvement, an economy absolutely will not work. Unless businesses are permitted to set their own prices based on their own production costs and customer demand, you are guaranteed to live in poverty.

The buffoons who “manage” the Victorian economy are creating disaster. It is why the most important element in the Victorian budget dealt with mental health: ‘Very targeted’: Acting Premier defends mental health levy.

Business owners have warned the levy set out in Thursday’s budget is a tax on employment and will hit those in the retail, hospitality and tourism sectors hard.

“These are very targeted, appropriate, well-thought-out revenue initiatives that impact less than 5 per cent of employers,” Mr Merlino said.

“Many of those are multinational companies. It is very targeted, and in terms of the benefit to businesses, right across the state of Victoria is massive….

The acting Premier rejected the notion that Victorian businesses – which were badly hit by the state’s second wave of the coronavirus pandemic caused by government failures in hotel quarantine and contact tracing – were being penalised for the state’s mistakes.

He also said a $4 billion budget blowout over the past two years on Victoria’s Big Build project had no impact on funding mental health services as the two were in different funding streams – the former in capital spending, and the latter on service delivery.

Looneys everywhere.

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11 Responses to Completing my short course in economics

  1. Shaun says:

    Me spending an extra $100 at the pub has absolutely no impact on money I have left to spend on bills and put food on the table, as I use cash at the pub and my eftpos card for the bills. I have made two accounts, so therefore I must have more money in each.

  2. Roger says:

    Many of those are multinational companies.

    So what?

    Thery employ Victorians, don’t they?

  3. Farmer Gez says:

    Mental As Anything with Greedy Andrews banging out “Live It Up” for the hundredth time.
    They’ve struck a chord with socialism but the tune’s a death march.

  4. Boxcar says:

    Victorian businesses – which were badly hit by the state’s second wave of the coronavirus pandemic caused by government failures in hotel quarantine and contact tracing

    Victorian businesses were badly hit by the Government panic and shutdown, not the virus.
    I don’t know about the other 26,000,000 or so Australians, but it would be great to meet any average Australian who suffered from coronavirus more than Victorian small business.

  5. Mango Man says:

    You also need to be sure that behaviour that distorts or reduces competition is blocked or policed. Unfortunately, Australia has allowed many sectors to become oligopolies or worse. At one point Woolies had so much market power they were screwing all three levels of their business – suppliers, staff and customers. Aldi and Coles finally turned up and ever since then Woolies has been a climbdown from its ridiculous margins. Qantas is similar, Shell has a vice like grip on gas supply, universities charge whopping fees while living on public funds, banks offer virtually no actual competition on services or charges and so on. That is the real hermit kingdom.

  6. JohnJJJ says:

    Price is information. It is objective information if it is competitive. It seems that Western pursuit of truth, scientific objectivity and measurability came with the Venice merchants then industrialization. Objective truth is needed for commerce, competition and trade. Now that we don’t need the last three, as it will all now come from the government, we have no need for objectivity. Power rules.
    Corollary: Science is dead. But for the extant scientists to remain in power they take the role of God: climate, disease, AI and calamity any minute without them.
    Mathematics for the people is not needed.
    Just a thought.

  7. Diogenes says:

    He also said a $4 billion budget blowout over the past two years on Victoria’s Big Build project had no impact on funding mental health services as the two were in different funding streams – the former in capital spending, and the latter on service delivery.

    Yes this is the way these lunatics think. At work, we had a demountable classroom that needed to be modified to accommodate a Special Ed class. The demountable was old and leaked, and needed an internal partition and a wet area added. It cost nearly 100k to repaired and modified. A brand new classroom could have been obtained for just over 60k including removal & delivery costs. The 100k was spent as that came out of two different ‘buckets’ of money, and the ‘bucket’ that the 60k could have been spent was already empty. Ultimately it all comes from one bucket – you and I

  8. Shane says:

    Talk about those inescapable price mechanisms , we all thought Victoria was the worst, ..well Hawaii is entering the current end game for this climate change worldwide pandemic. Lucky for Hawaii you dont need coal to fly there.
    https://headlineusa.com/lol-hawaii-replacing-its-last-coal-plant-w-a-giant-battery-powered-by-oil/

  9. Baa Humbug says:

    Vendors don’t set prices, they offer prices.
    Prices are set when enough customers decide they’re better off with the product than with their hard earned. The business then may become viable. Only then is a price settled (for however long it lasts).
    Good businessmen will do their research and have a good idea about the highest price consumers will accept. Customer reaction and pressure from competition will help settle a price.

    End pedantic quibble.

  10. RealWorld says:

    Do we even have a metric for value adding in Australia ?
    All we ever hear about is GDP – I’m damn sure our per capita value adding is a fraction that used to be – but does anyone know how to quantify it?

  11. FlyingPigs says:

    Do we even have a metric for value adding in Australia ?

    sure….

    it is the amount that can be borrowed to prop up our Sovereign Ponzi Scheme.

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