I'm not well versed in economics, and would like to better my understanding of how it functions. Here I have a question regarding a specific topic: the "supply and demand" theory.
Whenever I get into an argument about economics, "supply and demand" is invariably brought up by proponents of capitalism — though it seems they have a hard time fleshing it out themselves, which leads me to believe it is less of a genuine rebuttal than it is a conversation-shutting, dogmatic buzzword.
From what I understand, it is a market-based price determination mechanism that is supposed to inevitably lead to an equilibrium between what is sought by buyers and what is offered by sellers. But that's it.
So I'd like to have you guys' insight on what I'm supposed to make out of it, and maybe you can also point me to some sources or articles covering the subject. What's the history behind this "supply and demand" theory? Is it anything more than a theory and is it applicable to real-world economics? If so, does it necessarily stands in favor of capitalism or in opposition to socialism ?
I have 2 fucks. You want 3 fucks. I raise price of the fucks I can give, as you need more and will then have to pay a lot to get what I have.
I have 10 fucks. You need 1 fuck. The price lowers as I have too many fucks to give but you don't want them.
This basic principle is correct.
BUT! Here comes: Creation of artificial needs through marketing and propaganda. Cartels setting minimum or common prices. Bourgies stocking production or destroying part of it to keep price high.
You could say…
CAPITALISM WORKS ON PAPER…
Carson Hill
economic theory is still valid, regardless of the system used, it's like saying math is fascist or socialist, it's not, it's math. Granted, economic theory has a lot of bullshit attached, but like statistics, it's garbage in/garbage out, it's only as useful and meaningful as the people imputing data.
Supply/demand is a fact, it will show itself in a communist/socialist system, and it will need to be addressed. The example you listed are simply variables in the system, caused by people, and such variables will exist in a socialist system as well, some the same and some different.
No matter what system is used, as long as people are involved, fuckery *will* occur, human emotions will lead to poor decisions, ignorance will as well, nepotism will exist, arrogance will exist, sociopathy will exist, laziness will exist. As such, they are variables that need to be taken into account, if not, a socialist nation will have the same problems.
Josiah Gomez
So, planned economy and set prices by algorithms.
Kayden Campbell
could work. Just need to be smart and not pull a Venezuella by consollidating our exports in oil, less the revolution be set back another 100 years.
Lucas Brown
again, whatever algorithms and statistics are used are going to be selected by people, those people will have biases of sorts unless they are somehow vetted to preclude those biases. As AI gets better, it will hopefully separate the wheat from the chaff when it comes to human interference, but I remain concerned about the fact that there will no doubt be special circumstances that people need to be able to make their own decisions.
The main reason I'm a mutualist is that I don't have a lot of faith in central planning, too many variables, too much fog of war when it comes to the economic needs of areas and the people, I really think people should determine their own needs within reason and central planning should take a moderate stance, until such a time that AI becomes so advanced that people really don't need to do much at all.
Parker Peterson
I mean, if you ignore actual criticism of the theory.
Ayden Hill
I'm a mutualist also. Relying on neoclassical theories of economics isn't necessary to think that markets have a place in a socialist economy.
Eli Sanders
AI intervention would not circumvent the issues with human intelligence, merely reproduce them. As trans–/post-humanist you should be well aware of this.
Jason Young
Real subtle, Holla Forums.
Though if you're serious, you should certainly pick up a 100-level micro textbook or an AP Econ review book. If you understand calculus, go directly to "intermediate micro," 200/300-level. There's a lot more you should understand and a lot more intricacies than the graph you posted.
Theoretically, to every price per unit there corresponds a definite quantity that people will want to buy, and a definite quantity that people will want to sell. The former goes up, and the latter goes down, as price increases. If 400 units can be supplied at $40, but only 200 units are demanded, there is a natural pressure on the price to decrease. Say, at $30, 300 units are supplied and 300 units are demanded. This is the "equilibrium" which experiences no pressure on the price, until something happens to shift the supply or demand curves themselves (say, if the price of oil suddenly increases. this impacts a lot) at which point pressures will push the price and quantity towards the new equilibrium. Note that the equilibrium occurs where the supply and demand curves intersect, and where you maximize the area of the rectangle along the axes having (0,0) and p as opposite corners, where p lies on the lower curve in some interval. Basic micro is a very graphical thing.
Leo Mitchell
why is that tho
Hunter Morris
200 suppliers have nobody to sell to. So one or another will charge, say, $38 to undercut his competitors. Now, the same 200 units are still demanded, but the lower price has attracted new buyers and overall, say, 220 units are now demanded. This continues until the quantities of the two curves agree.
Similarly, if you have a bunch of people yelling for your product while too few are being supplied, you can afford to charge more, and the thicker margins attract new suppliers who are now willing to supply more.
Now, microeconomics is pretty rigorous when you appropriately formalize it, but a lot of people oversimplify it in their worldview. One important thing to note is that I've just been talking about this equilibrium and that some pressure exists on the price everywhere else. What this doesn't look at is how quickly the price adjusts towards equilibrium. Keynes famously said, "in the long run, we're all dead." Life itself is a state of disequilibrium, as is class rule.
Macro is interesting and the real policy-relevant sort of economics, but far more heuristic and subject to personal beliefs. Nobel-winning economists disagree on fundamental matters of how the market works.
It's pretty fun, was probably my favorite class back in high school. You should give the basics a serious study. MIT OCW has decent lectures on it iirc
Oliver Lee
it is generally and ambiguously true but never specifically true for example you learn soon after learning about it that there can be elastic demand, elastic supply, or a complete break in the demand at certain price points
its less fleshed out than the theory of voting with your money
Nathan Ross
its unscientific and can only approach reality with description anything that isnt a science is an art form at best and trying to apply rigorous math to it is flawed
No, it's not 'valid', it's not a hard empirical science or a formal one. It is not a fact, it is a concept used in a particular school of economics, see
Aaron Evans
Why would you give the fuck cheaper? You end up with 9 fucks anyway, but now you will have less money.
Julian Lee
I'm actually kind of disappointed that socialists have just accepted neoclassical theory as a matter of fact. The ideology is pure.
William Ward
What these guys were probably referring to is how neoclassicals believe that the only way for buyers and sellers to both get as much utility as possible is for them to buy and sell commodities on a free market.
If you break down what supply and demand is though for neo-classical theory, demand is ultimately based on human nature creating preferences for commodities and the selling of labor vs other time spending activities. Supply is ultimately determined by the preferences of capitalists thanks to the role they play in the production function of giving capital.
To neo-classical economists, these preferences are not the result of the economy itself and aren't reducible.
Basically, supply and demand exists, but in reality they are both determined in part by economic activity, look at Zizek's analysis of Coke-a-cola. youtube.com/watch?v=zxraW7h4BJU
Commodities work to create their own demand and utility, changing how we allocate resources.
But also, this neo-classical model doesn't really work out in the real world. Most markets don't reach equilibrium, and it is probably impossible for them to reach equilibrium because of the way price signals work, current production is always based on yesterdays consumption, so by the time everything is produced, the information is already dated. Not to mention, that according to basic neo-classical tools to measure allocative efficiency, firms in the communist bloc that didn't have markets were just as efficient as those in western states with markets.
By this I mean the supposedly irreducible preferences
Blake Cox
Same with chemistry and physics, man. They only ever describe and make testable predictions about the material world. In practice this is a lot.
Economics isn't testable in the same sense and its predictive capability suffers for it.
Though the logic of the rigorous mathematical approach is valid, meaning truth of the conclusions depends on truth of the assumptions. This is a good approach because poor reasoning can be struck out, but misunderstanding what an assumption means or when a result applies causes problems.
Supply and demand is just one factor of price. It's good theory when talking about theoretical individuals exchanging goods on a desert island but the whole weakness of microeconomics is it cannot seriously explain macroeconomics and industrial capitalist production as a totality and its reoccurring crises.
What you want to look at is costs of production as a factor of prices because prices depend more heavily on the productivity in different branches of industry (e.g. intensity of competition) and the balance of forces between the branches than the movements of supply and demand.
In a cyclical crisis you have a temporary overproduction (i.e. supply > demand) with a trade cycle, followed by recession (decline in production) which restores equalibrium between aggregate supply and demand but a structural crisis is when fundemental problems impede normal growth… a cyclical crisis may be what revels the presence of a more fundamental structural crisis.
Nicholas Miller
The problem with markets is that price roofs and price ceilings must be put into place in order to prevent the market from collapsing, in other words, equilibrium can not be met, meaning poverty, vacancy, overproduction, underproduction. Markets are not efficient because of price. Remove price and there is nothing preventing equilibrium save for things like resource shortage or technological disadvantage, both things that cause demand for solutions which can be supplied.
