WoV Formal Debate!

Greetings,

Given all of the recent activity involving Economic discussions and creation of value, a formal Debate was both proposed and accepted which will involve BigFoot66 and yours truly!

BigFoot66 also requests that the following be stated:

Quote:

I would want some kind of loud disclaimer letting the reader know that neither of us hold advanced degrees (I assume) and that someone would be an idiot to think that you and me are the best source of info on our respective schools of thought.

Topic

Describe and defend an Economic system that best creates value in the Economy.

Mission146- Will generally be premising his position on Neo-Keynesian Economic Principles.

BigFoot66- Will generally be premising his position on the principles of the Austrian School of Economics.

---If this goes really well, then there may be a second Debate in which Austrian v. Keynesian Business Cycle Theory is discussed.

Combatants

BigFoot66:

Education: Bachelor's of Political Science

Occupation: Real Estate

Political Leanings: Strong Libertarian Across the Board

Height: 6'4"

Weight: ~285lbs.

Mission146:

Education: Bachelor's in Business Management/Economics

Occupation: Hotel Manager

Political Leanings: Economics- Hard Left, Social- Slight Left, Criminal- Hard Right

Height: 6'4"

Weight: 222lbs.

Judging

The Debate will officially begin around Monday, and with its official beginning, the opening poster has 72 hours within which to make his introduction. Each Debate participant will choose his own Judge and the two Judges will choose a third Judge.

BigFoot66 already has a Judge in mind, however, I do not. If anyone is interested in Judging, please make a brief post as to why you would make a good Judge. I will, most likely, select a Judge from this thread who would be interested in participating. The two Judges, once chosen, will choose a third Judge from this thread.

Format & Rules

Each participant will make a total of three posts. The first post must be made within 72 hours of the declared beginning of the Debate. Each subsequent post must be made within 72 hours of the post prior.

The Judges will choose who goes first by PMing an-as yet-unidentified individual the result of a coin flip. Best two out of three determines the winner of the coin flip who may either post first or defer.

1st Post-Introduction and Premise

-The first post will be for no other purpose than to introduce one's own position. The second person to post his introduction shall offer no direct counter-argument to the first post as it is the purpose of the Introduction to state one's position.

2nd Post-Argument

-The purpose of the second post is to argue the Introduction. The second person to post argument shall not Rebut the first person's Argument post and must focus any direct argument on the first poster's introduction.

3rd Post-Rebuttal and Conclusion

-The third post shall be for the purposes of Rebuttal and Conclusion. Each poster may address anything in his opponent's first or second post, however, the final poster shall not directly address anything in his opponent's third post.

Conclusion

Whether or not you choose to participate as a Judge, BigFoot66 and myself thank you for your kind attention and we hope to make this an informative, but most importantly, entertaining show!

The Judges will be on their Honor that they will not be swayed by any bets made as to who will win!

If you'd like to Judge, please post in this thread. If not, this will also be the thread for discussion.

I would like to nominate myself as a judge. I could be the resident layman.

You do realize economics isn't really a science. You can
put 10 economists in a room and they might not agree
on anything. Economic theories can't be proven, its
all speculation.

Quote: EvenBob

You do realize economics isn't really a science. You can
put 10 economists in a room and they might not agree
on anything.

Thats why it makes for a interesting debate topic.

Quote: bigfoot66

I would want some kind of loud disclaimer
letting the reader know that neither of us hold advanced
degrees (I assume) and that someone would be an idiot
to think that you and me are the best source of info on
our respective schools of thought.

Dude, enough with the jokes. Do you have
a serious disclaimer?

Looks good to me. I think it should be "a debate to the death" though, just to keep things interesting.

Quote: rxwine

Looks good to me. I think it should be "a debate to the death" though, just to keep things interesting.

I agree, these are two big guys, no shirts and 8"
Bowie knives. Course Bigfoot is pushing 300 pounds,
maybe shirts is a good idea.

Quote: EvenBob

You do realize economics isn't really a science. You can
put 10 economists in a room and they might not agree
on anything. Economic theories can't be proven, its
all speculation.

All climate scientists believe in harmful man-made climate change? All physicists believe neutrinos can't exceed the speed of light? All astronomers believe in life on other planets? All meteorologists agree a hurricane will move X direction?

The reason controversies in niche disciplines become known outside them is because they're the things that are controversial. But there's a tons of things in any discipline that are universally agreed upon. The earth orbits the sun, matter is composed on elementary building blocks, the Gulf Stream makes part of the UK warmer.

Economics is no different. The central building blocks of 101-level classes will be the same across the country. Core economic insights like the slope of supply and demand curves (people consume less of things that cost more, sellers want to provide more items for sale at higher prices) and diminishing marginal utility (people value successive numbers of an item less and less) are powerful, widely applicable, and widely agreed upon.

And EvenBob, please don't misunderstand the job of an economist. An economist hired by Romney might be tasked with using the insights of economics to say show the value of tax cuts while an economic hired by Obama might be tasked with showing the cost of uninsured families. That doesn't mean they disagree, it just means they're being given a different problem to work on and possibly a different set of assumptions with which to work. What an economist does though is analyze things within the set of assumptions. The Obama economist will be able to tell you which sort of uninsured folks cause the most cost to taxpayers, and any quality economist asked that questions and given the same data should derive the same answer.

The popular criticism of economists as indecisive comes from misunderstanding the relevance of their personal views. If you ask an economist professionally whether international trade is good or not, he shouldn't be able to give you an answer. Instead he needs to know how much you value more consumption and wealth by the total population, versus how important it is to protect the status quo of individual groups who would be impacted by new trade policies. If a labor union hires me to do this analysis and tells me that their values put great worth on local blue collar folks being well paid then my analysis will rightly state more foreign trade would be very costly. But simply polling economists on policy issues is no different than polling biology teachers on evolution. There will be biases present in the population, but neither person's job is to present revealed truth, but rather than analyze and educate respectively.

Quote: sunrise089

What an economist does though is analyze things within the set of assumptions. .

If it was a science, we wouldn't have people believing
rabidly in socialism and capitalism. There would be just
one way of doing things. Building an airplane is science.
Nobody argues about the principals of flight. But they do
argue about the principals of economics.

Quote: EvenBob

If it was a science, we wouldn't have people believing
rabidly in socialism and capitalism. There would be just
one way of doing things. Building an airplane is science.
Nobody argues about the principals of flight. But they do
argue about the principals of economics.

Airplanes are designed by engineers, applying the insights of scientists who did foundational work in materials, aerodynamics, fuels, etc. Aerospace engineers are not "scientists" in the conventional sense.

That aside, citing airplanes as an example of "one way of doing things" is ridiculous on its face. An A380, an F22 Raptor, and a home-built kit plane are hardly "one way of doing things."

If you want to say you wish economics were more homogeneous in their personal public policy views I can't tell you you're wrong, but I think you're very wrong to apply a standard of universal agreement as the determinant of the validity of a profession.

Quote: EvenBob

I agree, these are two big guys, no shirts and 8"
Bowie knives. Course Bigfoot is pushing 300 pounds,
maybe shirts is a good idea.

I am actually way over 300. I just told Mission that I was "larger than when I wrestled at 285 lbs 6 years ago"

Quote: sunrise089

If you want to say you wish economics were more homogeneous

Its the witchcraft of the modern age, everybody is an expert. And nobody
is an expert.

Quote: bigfoot66

I am actually way over 300.

Hmm. Could you be more specific? Way over
could mean 330 or 370.

“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

― Friedrich von Hayek

Economics is a science in so far as it is an attempt to describe the real world. Unfortunately, it is very difficult to run large scale economic experiments in any kind of practical or ethical manner. Combine this with the fact that modern economies comprise hundreds of millions of people engaging in dozens of transactions each every single day and the idea of trying to isolate the effects of, say, a regulatory change, or a new technology, or a period of inflation, becomes very difficult. Thus there are historical examples of any given government policy being correlated with just about any outcome. For example murder rates are positively correlated with ice cream sales. There was an academic paper a few years back that presented data to support their claim that a rise in the minimum wage had lead to a decrease in unemployment, a claim that is absurd on its face. So yeah, economics is a field where there is more disagreement among the experts than, say, chemistry.

Quote: bigfoot66

Economics is a science in so far as it is an attempt to describe the real world.

Every economic theory requires the perfect storm
of events to make it happen. Since this is impossible,
every economist is on an island all by himself.

I think most lay people view economists (at least the talking head ones on TV) much as the mysterious oracles of old. Not sure exactly what they said; and don't know if the coming year is going to be sunshine or meteors.

Economics like all social sciences try to describe and most importantly predict Human behaviour.
Physical sciences decribe and predict the physical laws (behaviour) of nature and matter, like describing and predicting the effects of gravity.
Economists make certain assumptions about the behaviour of humans (like rational thought, access to information etc) in order to make their theories and have theories that make valid assumptions.
Some of the assumptions might be not 100% absolutely true. Like all humans behaving rationally with regard to what is in their economic interest. But that does not negate the value of a theory if say 99% behave rationally and 1% irrationally.

But obviously trying to predict the behaviour of humans is a lot more difficult than trying to predict the behaviour of nature.
People tend to think that economics is about inflation rate, unemployment and other techical terms that have nothing to do with humans.
Whereas it is just tries to predict the economic behaviour of humans.
It is also almost impossible to run experiments in economics to confirm a theory. You just have to take data under different conditions and under different times in history to prove a theory. Like raising taxes 20 years ago had that effect whereas raising taxes 10 years had a completely different effect.
And of course you have to condider that the x result might not be because of raising taxes but because of some other parameter change.

And also people's economic behaviour is not only effected about how are the current parameters (ie inflation, unemplyemt, tax rates etc) but how they expect these parameters to change in the future. Like what is happening in Europe now. The economic crisis is becoming bigger not just because people have lost their jobs or had a reduction on their income BUT also because people expect the situation to become worse they spend even less in order to have some saving for the worse times to come. It's a self-fulfiling cycle of gloom.

Sounds interesting and educational. I decline to be a judge but will certainly follow the action.

Quote: EvenBob

You do realize economics isn't really a science. You can
put 10 economists in a room and they might not agree
on anything. Economic theories can't be proven, its
all speculation.

You never heard it called "The Dismal Science?"

I would volunteer to be a judge. I hold a BS in History (Quant) and have been involved in the money business for 16 year. I am well read in the economic theory and market/credit cycles. I have bothFundamental and Technical course work in the CFA and CMT programs and stay current with global econ briefings from Goldman, Credit Suisse,Ned Davis, JP Morgan, BTIG, Northern Trust and the Conference Board.

I was on the HS debate team and understand judging a well supported argument regardless of whether it conflicts with my own opinions. I personally am not in full or even partial agreement with either of the "economic" schools of thought the combatant aligns with.

My only concern is time to read, review and respond to the debates at their conclusion...I would hope facts come from "trusted sources" using generally accepted public data ( a rant and a home made chart from zero-hedge doesn't hold water). How long are you giving judges to review the arguments and prepare responses?

FWIW economists have accurately predicted 22 of the last 15 recessions... like a broken watch... bound to be right twice a day.

Quote: AceTwo

It is also almost impossible to run experiments in economics to confirm a theory.

Exactly. Its all theory and conjecture. The human element
makes it totally unpredictable. I'm not understanding how
a debate about it can be productive. Its like dedating if
god exists. Whats the point.

All I can figure is these are both really young guys and they
think the perfect economic model is out there somewhere.
They haven't been around long enough to realize it doesn't
exist.

Quote: EvenBob

Exactly. Its all theory and conjecture. The human element
makes it totally unpredictable. I'm not understanding how
a debate about it can be productive. Its like dedating if
god exists. Whats the point.

All I can figure is these are both really young guys and they
think the perfect economic model is out there somewhere.
They haven't been around long enough to realize it doesn't
exist.

Humans are more predictable than you might think. Offer a man identical products in identical circumstances at different prices and her will always prefer the less expensive one. People always want more rather than less, broadly understood. People prefer to work more efficently rather than less efficently.

I am interested in "dedating" in order to spread the ideas of a minority school of thought that I happen to think is right. If I am wrong that will be exposed, but if I am right perhaps I can shift some minds towards my way of thinking. Your comment is much more true of politics than economics, yet people debate politics all the time, and intelligent people are expected to follow the national debate on politics. Mr. Obama has spent more than a trillion dollars in 'economic stimulus' and used Keynesian economics as a justification. Mr Bernanke has printed money at an unprecedented rate and lowered interest rates close to zero based on the same concepts. Mission would, I believe, argue that these policies make us wealthier and save an economy which is dangerously close to falling off the cliff. I argue that these policies are terribly wasteful, will wreak havok on an already battered economy, and will cause a massive transfer of wealth of the poor and middle classes to the wealthiest. The fact that at least one of our models is imperfect doesn't matter. Newton's laws are also imperfect but they are useful.

Quote: Scotty71

I would volunteer to be a judge. I hold a BS in History (Quant) and have been involved in the money business for 16 year. I am well read in the economic theory and market/credit cycles. I have bothFundamental and Technical course work in the CFA and CMT programs and stay current with global econ briefings from Goldman, Credit Suisse,Ned Davis, JP Morgan, BTIG, Northern Trust and the Conference Board.

I was on the HS debate team and understand judging a well supported argument regardless of whether it conflicts with my own opinions. I personally am not in full or even partial agreement with either of the "economic" schools of thought the combatant aligns with.

My only concern is time to read, review and respond to the debates at their conclusion...I would hope facts come from "trusted sources" using generally accepted public data ( a rant and a home made chart from zero-hedge doesn't hold water). How long are you giving judges to review the arguments and prepare responses?

FWIW economists have accurately predicted 22 of the last 15 recessions... like a broken watch... bound to be right twice a day.

Thank you for throwing your hat in the ring, sounds like you are more than qualified.

Quote: bigfoot66

Humans are more predictable than you might think.

Really? Then why do they keep trying socialism
economics again and again and keep failing
miserably. Please don't list some country in EU
with the population of Vermont as a good example,
I'm talking about countries with real populations,
like Spain and Greece.

Quote: EvenBob

Really? Then why do they keep trying socialism
economics again and again and keep failing
miserably. Please don't list some country in EU
with the population of Vermont as a good example,
I'm talking about countries with real populations,
like Spain and Greece.

If human's aren't predictable, why wouldn't socialism works sometimes? It seems in fact that the very fact you believe socialism always fails shows that there IS predictably in a economic model.

Well done, that ends that debate quite nicely.

Quote: Scotty71

FWIW economists have accurately predicted 22 of the last 15 recessions.

Quote: bigfoot66

Thank you for throwing your hat in the ring, sounds like you are more than qualified.

22 of the last 15? That's grand....hehe

Quote: EvenBob

Really? Then why do they keep trying socialism
economics again and again and keep failing
miserably. Please don't list some country in EU
with the population of Vermont as a good example,
I'm talking about countries with real populations,
like Spain and Greece.

I forget who put it this way, but an economist I read noted that there are two fundamental economic systems that we all live in, the family and society. The family is organized on principles that we might well call socialism: To each according to his need (if the kids need something they get it even if they contribute nothing economically) from each according to his ability (mom and dad are expected to work long after their own personal needs are met). The larger society tends to operate on capitalist principles (absent government intervention). There is a temptation in man to apply the family economic system to society at large, and this is disastorous. So it is predictable that a lot of people will think socialism is a good idea and it is even more predictable that socialist societies will fail.

With respect to Judging, ideally, the Debates would be Judged within seven (7) days (and while the Judges may compose their Judgments seperately) they would ideally post them at about the same time.

Greetings!

The original OP with respect to this Debate is quoted below, in its entirety.

The selected judges are as follows:

ChickenMan: Chosen by Mission146

Scotty71: Chosen by BigFoot66

Croupier: Chosen by Scotty71 and ChickenMan

I deferred the coin-toss choice to BigFoot66 as I technically challenged him, he chose heads and lost, and I then deferred the right to post first to BigFoot66, so he will be posting 1st/3rd/5th, and I will be posting 2nd/4th/Last.

This debate is officially underway and BigFoot66 has 72 hours within which to post his introduction.

Quote: Mission146

Greetings,

Given all of the recent activity involving Economic discussions and creation of value, a formal Debate was both proposed and accepted which will involve BigFoot66 and yours truly!

BigFoot66 also requests that the following be stated:



Topic

Describe and defend an Economic system that best creates value in the Economy.

Mission146- Will generally be premising his position on Neo-Keynesian Economic Principles.

BigFoot66- Will generally be premising his position on the principles of the Austrian School of Economics.

---If this goes really well, then there may be a second Debate in which Austrian v. Keynesian Business Cycle Theory is discussed.

Combatants

BigFoot66:

Education: Bachelor's of Political Science

Occupation: Real Estate

Political Leanings: Strong Libertarian Across the Board

Height: 6'4"

Weight: ~285lbs.

Mission146:

Education: Bachelor's in Business Management/Economics

Occupation: Hotel Manager

Political Leanings: Economics- Hard Left, Social- Slight Left, Criminal- Hard Right

Height: 6'4"

Weight: 222lbs.

Judging

The Debate will officially begin around Monday, and with its official beginning, the opening poster has 72 hours within which to make his introduction. Each Debate participant will choose his own Judge and the two Judges will choose a third Judge.

BigFoot66 already has a Judge in mind, however, I do not. If anyone is interested in Judging, please make a brief post as to why you would make a good Judge. I will, most likely, select a Judge from this thread who would be interested in participating. The two Judges, once chosen, will choose a third Judge from this thread.

Format & Rules

Each participant will make a total of three posts. The first post must be made within 72 hours of the declared beginning of the Debate. Each subsequent post must be made within 72 hours of the post prior.

The Judges will choose who goes first by PMing an-as yet-unidentified individual the result of a coin flip. Best two out of three determines the winner of the coin flip who may either post first or defer.

1st Post-Introduction and Premise

-The first post will be for no other purpose than to introduce one's own position. The second person to post his introduction shall offer no direct counter-argument to the first post as it is the purpose of the Introduction to state one's position.

2nd Post-Argument

-The purpose of the second post is to argue the Introduction. The second person to post argument shall not Rebut the first person's Argument post and must focus any direct argument on the first poster's introduction.

3rd Post-Rebuttal and Conclusion

-The third post shall be for the purposes of Rebuttal and Conclusion. Each poster may address anything in his opponent's first or second post, however, the final poster shall not directly address anything in his opponent's third post.

Conclusion

Whether or not you choose to participate as a Judge, BigFoot66 and myself thank you for your kind attention and we hope to make this an informative, but most importantly, entertaining show!

The Judges will be on their Honor that they will not be swayed by any bets made as to who will win!

If you'd like to Judge, please post in this thread. If not, this will also be the thread for discussion.

Quote: EvenBob

Please don't list some country in EU
with the population of Vermont as a good example,
I'm talking about countries with real populations,
like Spain and Greece.

So, France or Sweden, then? :-)

Seems to me this thread belongs on Diversity Tomorrow. Or am I missing something ?

We discussed that, but it started here prior to DT being opened.

Quote: Mission146

We discussed that, but it started here prior to DT being opened.

Then I think you are grandfathered in and I remove any and all objections.

First of all, Thank you to Mission146 for challenging and organizing the debate, and thank you to the Judges ChickenMan, Scottt71, and Croupier for volunteering their time. Remember, judges, to send me your Paypal addresses via pm so that I can transfer funds after you name me the winner.

10,000 years ago, man lived a life completely alien to anyone reading this. The big development of that period was agriculture. Before that, man had to hunt and gather food, and life remained absolutely the same economically from one generation to the next back to the beginning of time. A hunter would produce food by killing the mammoth or finding a fruit tree and harvesting the fruit, and then he would consume it with his family relatively quickly. Compared to today, this was a terrible time to live. Starvation was never more than a few steps away and predators were also a concern. Even if you managed to survive, you had to spend almost all of your waking hours in search of the most basic resources for life. The hadn’t even developed Video Poker yet.

The domestication of plants and animals allowed man to live a much better life. Now he can decide what he will eat by what he produces himself. If he prefers frittatas to steak, he simply raises fewer cows and more chickens. Before agriculture, once he caught the mammoth the meat would be good a day or 2, now man can raise cattle and today that he will not eat for months or longer. He can cultivate a corn crop that will feed his family for the whole year. Where once he had to rely on his hunting skills and cunning to capture a wild boar if he wanted bacon, he can now manufacture pigs at his discretion.

This early farmer’s wealth is simply the sum of the goods on his farm, and for the purposes of this argument lets assume that the goods he produces do not perish. The farmer with 12 pigs is wealthier than the farmer with 6 pigs. The farmer with 6 bushels of corn is wealthier than the farmer with 4, etc. He is able to make himself wealthier, then, by producing more than he consumes. If he expects to consume 1 pig every 6 months, then he will accumulate pigs if he produces a new pig every 4 months. When a person produces more than they consume, it is called saving. Saving is always necessary to accumulate wealth.


Saving is good for its own sake. Having 2 silos of grain saved up is an insurance policy against future crop failure or allows man to take a day of and enjoy leisure. But more important, it allows man to invest in new tools that will make him more productive. An investment is when man produces goods that will make future production more efficient. Imagine that our farmer can plant 100 corn plants in a day if he does all the work with his hands. If he had a shovel he would be able to plant 200 corn plants a day, but it would take him a day to make the shovel. He misses out on a some early on, but as this table of his output shows, he is wealthier by the end of the week.

Day	With Shovel	Without Shovel
Day 1	0	100
Day 2	200	200
Day 3	400	300
Day 4	600	400
Day 5	800	500

The process of investing savings in this sense is called the formation of capital. In this case, the shovel is the capital. The process builds and compounds on itself. Now that our farmer can sow corn twice as fast, he has freed up time that he can use to construct an irrigation ditch, or maybe he might develop a plow he can use, or perhaps he might do some experimentation to discover that using the manure from his animals in the fields makes his plants more productive. This additional capital will make him more efficient still and allow him even more resources to devote to further expanding his capital. The accumulation of capital is why we are so much wealthier than our ancestors. Their willingness to invest in paved roads, factories, tools, buildings, etc. as opposed to consuming everything that they produced at the time, allows us to work much more efficiently today.

In summary, then, the individual makes himself wealthier by producing more than he consumes. He can keep the surplus as either stored goods for later consumption, or he can instead invest his savings and turn it into capital which will make future production more efficient. While accumulating finished goods is one way of increasing wealth, man becomes much wealthier over the long run by accumulating capital.

The above is what is called autistic exchange, meaning that there are trade-offs but the decisions affect only one party, as opposed to trade between parties. Value can also be created without additional production or accumulation of capital. In the 1945 Economica article Economic Organization of a POW Camp, R A Radford describes his experience in a WWII German POW camp. The prisoners were given the bare minimum food by the Germans, and the only luxury or surplus came in the occasional distribution of Red Cross packages that contained a dozen or so items like a tin of beef, carrots, chocolate, cigarettes, toilet paper, etc. Each prisoner was given the same package, but as you can imagine, people valued the items differently. A Hindu prisoner had no interest in the beef, but maybe he enjoyed the jam. There were likely vegetarian prisoners, Heavy smokers, light smokers, nonsmokers, etc. Given that production of goods was next to impossible in this situation, it turned into a case study on economics. Early on the nonsmokers would give away their cigarettes, and the Hindus their beef, but giving freely was soon frowned upon and trading became the norm. Before the market settled and it became known that a bar of soap was worth 7 cigarettes, jam was worth twice as much as butter, etc, “Stories circulated of a padre who started off round the camp with a tin of cheese and five cigarettes and returned to his bed with a complete parcel in addition to his original cheese and cigarettes,” (191). The story may not be true but assume it is. Few details are given, but let’s assume that the priest did not steal or defraud anyone in the process of obtaining these things, but that he got them by offering and accepting voluntary trades with the various other prisoners. This story is a perfect illustration of how value can be created without production. What exactly is the priest doing here, and is he helping or hurting the other prisoners? On the surface it seems obvious that the priest has enriched himself at the expense of his neighbors. There are a fixed number of red cross packets, and he has now has 2 packets: His neighbors simply must be worse off on the whole than before he began his journey of trading.

However, on closer inspection, it becomes clear that he has actually made his neighbors better off. Let’s say he starts with his 5 cigarettes and his tin of cheese, and goes to the Hindu area. They have no interest in the beef, so he gives them his 5 cigarettes for 5 tins of their beef. Where they once had a something of no value to them, they now have cigarettes. The Hindus are happy to make the trade because they absolutely cannot eat the beef but they enjoy smoking. He then finds a group of Mormon prisoners who have no use for their cigarettes, and he trades them the cheese and beef for their 6 packs of cigarettes. The Mormons are happy to make the trade because they do not smoke and enjoy beef. This process continues as he goes around the camp trading, and in every case he makes life a little better for his trading partner and also himself. The Priest has a better knowledge for what the market prices for the goods are and is able to buy low and sell high, making himself wealthier AND every person that he has traded with is better off as a result of the trade. Thus value is created by the priest even as he removes goods from the society.

Free trade always results in this economic miracle where both sides of the trade are better off. When I buy a bottle of beer at the liquor store, I hand the clerk $2 and he hands me the beer, and there is this moment where we both say “Thank you”. I want the beer more than the money, he wants the money more than the beer. When we make the trade, both of our lives are made better. The more voluntary free trading that occurs, the wealthier that everyone involved is.

With that I have said plenty, and we will now wait at most 72 hours for Mission's response.

Greetings,

I would first like to thank BigFoot66 for accepting the challenge that this debate will present and for the time and energy he will surely devote to presenting and defending his position. I would also like to thank our judges: ChickenMan, Croupier and Scotty71 for taking the time not only to read these posts, but also to fairly adjudicate them which will necessarily involve reading them a number of times. Finally, I would like to thank all of our WoV Members who choose to read this debate, and I hope I provide BigFoot66 enough of a challenge to make it interesting for the judges and spectators alike.

What is Value?

Value is simply, “A fair return of equivalent in goods, services or money for something exchanged.”(1) This is not the strict economic definition of value, but rather a general definition because economical terminologies will be used later on, but it is important to begin with a general approach.

It will also be important to remember that the question posed is, “What Economic system best creates value in an Economy?” The question discusses the Economy as a whole rather than simply the value of a currency, the value of stock investments, the value of a soda shop or the value of a cup of coffee. If an individual believes that the value of the economy is nothing more or less than the value of the currency of that economy relative to the currency of other economies, then the question would be as simple as, “What is the value of x country’s currency,” but most people would not reduce the value of an entire economy to such terms, nor should they.

The value of an economy, simply, can be measured by the general well-being of the citizenry who falls under that economy. Maslow’s Hierarchy of Needs (2) provides a readily understandable chart of how a person’s needs are prioritized from Physiological-Safety-Love/Belonging-Esteem, and finally, self-actualization. However, this hierarchy can just as easily be applied to a group of people as it can to an individual person. In other words, it can be argued that a society, and by extension, the economy of that society is only as strong as its weakest links.

Physiological Needs- These are needs such as food, water, and clothing, to name a few. These needs satisfy the most basic elements of survival when they are met. If a country wants to be seen as safe and strong, then it is important that as many individuals in that country’s citizenry as possible have their Physiological needs met.

Safety- The focus here will be mainly on security of the body, employment and health. An exceptionally strong and active economy will be one in which the vast majority, if not all of the members of society, can be secure with respect to housing and healthcare.

Love/Belonging-These are mainly needs that only apply individually, however, when you have a populace who are both safe and economically stable, then the stress that such individuals will feel is reduced compared to those who have basic survival to worry about, and therefore, they will be able to focus more of their energies on attaining that which it takes to satisfy these needs. There is, however, a certain sense of belonging to a country that one would experience in the event that one lived in a country in which everyone being taken care of is the expectation.

Esteem-These are qualities that can be applied to a society, self-esteem, respect, achievement and confidence. In the event that a society cares for its citizens and manages its affairs in such a way that everyone lives well, then it can rightfully be stated that society will have the respect of other societies and the individuals there within. For example, if you have a country into which many people from other countries want to immigrate, then it is clear that your model is respected. The self-esteem and achievement simply come in the form of the pride an individual feels to be a member of the society in question.

Self-Actualization-Self-Actualization is probably the most subjective of these measurements, (ex. Morality) so it probably applies only to individuals, however, if a society can take care of the needs of individuals such that they do not have to worry about the lower needs, then the path to self-actualization will be much easier.

The Keynesian System of Economics, by design, exists to achieve the purpose of maximizing the amount of people who have their needs met with respect to physiological needs and safety. Simply stated, the goal of the Keynesian system is to get as much money as possible moving around the economy as quickly as possible with the purpose of utilizing as many goods as possible, (with exceptions) so as a necessary result, assuming enough goods of or related to physiological needs and safety are being produced, or otherwise being brought into a given society, everyone should be able to provide themselves with them. These goods will henceforward be referred to as, “Base goods.”

It is important to very quickly correct a few common misconceptions about the Keynesian Model. First of all, the Keynesian Model does not strictly prohibit saving or think that saving is bad for the economy, specifically, the Keynesian model advises saving money if it is for the purpose of investment designed to promote economic growth or develop goods more efficiently.

Secondly, the Keynesian Model, as much as some would like to believe, is not a strictly Communistic or Socialistic Model, in fact, it promotes having a private sector while understanding that the private sector does not make the best decisions on the societal level (while they may be the correct decisions on the level of an individual business or businesses making the decision) and in some cases the microeconomic needs of a business may put them in a position in which their actions, by necessity, must diametrically oppose the best macroeconomic (big picture) course of action.

The Keynesian Model is designed to correct for the latter problem by putting macroeconomic focused controls in place, and also by generally creating an economy in which the best theoretical microeconomic decision also serves the greater macroeconomic purpose. In other words, it creates an economy in which the decisions that privately run businesses make generally help the economy.

How does it work?

The most difficult assumption for an individual opposed to the Keynesian Model to reject is that money, in and of itself, absolutely has value. It doesn’t. Money has relative value, as do most other things, however, a key difference is that many other things absolutely have at least some value whereas that is not the case with money.

For example, in an Armageddon-type scenario, people would be reduced to having to work directly to achieve their basic Physiological Needs. In other words, people would either have to find their own food (rather than having easy access to it via a grocery store and method of exchange-money) or steal their own food. To this extent, food has absolute value in that if an individual does not have food, then that individual will starve. The same concept applies to shelter, in greater or lesser degrees depending on the local environment, however, if it is the dead of winter in a state such as Ohio, and an individual does not have shelter, then it is highly likely that individual will freeze to death.

That food and shelter absolutely have some value is beyond reproach, however, it can be noted that the value of food and shelter, in the individual sense, are relative. For example, if an individual goes out to eat at a Chinese buffet and gorges him/herself to the point of near explosion, and while on the way home, sees a sign advertising large pizzas at Domino’s for $6.00, that person is very unlikely to buy a Domino’s pizza because the Physiological need for food has already been met. However, if an individual is extremely hungry and has exactly $6.00, and the Domino’s in question is the nearest food source for miles, then there is little question that the relative value of the large pizza to that person is great. However, people need food in general, have always needed food, and will always need food, so there is no question that the large pizza has some sort of absolute value because even the individual who has gorged him/herself at a buffet will eventually be hungry again.

Money is totally different because it does not have any absolute value whatsoever, the value of money is strictly relative and exists only because the use of money is more efficient than the barter (trading goods for other goods) system. For example, if an individual were to go to some African tribe who had never been exposed to paper currency in any form and indicate that he/she wants to trade the paper currency for food, then that individual would likely be laughed at or the tribe members simply would not know what to think. The absolute value of money is a piece of paper with some ink on it, if an individual were to take a piece of printer paper and put ink on it, then he/she has actually decreased the value of the printer paper by besmirching it such that something cannot be cleanly printed on it anymore. Money, in and of itself, does not satisfy any of the Physiological Needs or Need for safety, it merely satisfies a desire for efficiency of exchange.

In the case of society, money is merely representative of goods that would otherwise be bartered. For example, if one goes to a department store and sees that there is a blanket there for $10.00, and then goes to a grocery store and sees that a box of cereal is $2.00, and he has $10.00, then he could choose between five boxes of cereal or a blanket with that $10.00. In the barter system, assuming the same relative evaluations, he would trade his blanket for five boxes of cereal. Money is efficient in this way because most people/places would like to deal in money, so an individual does not have to drag his blanket around to every shop in town to finally find someone who wants to trade some cereal, the grocery store always wants to trade its cereal (for money) and the department store always wants to trade their blankets. The relative value of a good, therefore, is simply how much money an individual wants to pay for that good.

Money is efficient, but it is not always effective.

Money is effective when it facilitates being traded for goods. However, when money is taken out of an economy completely, then it cannot be traded for the goods. The goods are still there, but the money is not there. Money taken out of an economy, in terms of usefulness, can simply be compared to goods taken out of a barter economy. Imagine if you had a tomato-grower in a barter economy, and his only source of attaining other goods was to trade his tomatoes. If this individual decided that he was going to hold all of his tomatoes without ever taking them to market, then two things are going to happen:

1.) The tomatoes are going to become rotten and useless to anyone.



And



2.) The tomatoes are doubly ineffective because he could have gotten other goods for the tomatoes.



In this case, you have an individual who is stuck with a disgusting pile of rotten tomatoes which other people would have happily consumed and he could have gotten other goods from those people who would have consumed the tomatoes making everyone more happy and fulfilling more of peoples’ needs. The problem is further compounded by individuals who are now stuck with surplus amounts of goods that they would have been perfectly happy to exchange in order to get the tomatoes.

Money is not tomatoes though, money can’t go bad, so how is this relevant?

It is true that money cannot go bad, but the tomatoes still can. Remember that the purpose of money is simply to reflect something, or to act in place of something, in a barter equation. If there are tomatoes, and the tomatoes are not purchased with money (assuming that is the only acceptable form of purchase) then the tomatoes will go bad. In this case, not only are the tomatoes ineffective and assuaging hunger, but the entire process in terribly inefficient. Remember that the tomatoes did not just spontaneously appear in the bin at the grocery store, the tomatoes were grown on a farm and provided with other resources (time in caring for them, plant food, water, potting soil) in order to facilitate their existence, so when the tomatoes are directly wasted (rotten) all of the goods that went into the creation of the tomatoes are indirectly wasted.

The Keynesian System of Economics works to solve this problem by facilitating a doubly-good outcome for the tomatoes. The goal is that not only will the tomatoes not be wasted, but also that an individual who wants the tomatoes have the ways and means by which to obtain the tomatoes, in effect, the money to get them. The Keynesian System achieves this goal by having money be more active in an economy.

The first way that the Keynesian System of Economics encourages monetary activity is by increasing wages to such a level that Physiological and Safety Needs should be met. This is one of those rare areas in which a Government (or other body) has to step in for Macroeconomic benefit because the seemingly best thing to do from a Microeconomic (single-business, in this case) standpoint is to pay as little as possible for an employee of at least the bare minimum quality needed for the job. The Keynesian System encourages that all employees be paid enough to meet their Physiological and Safety needs because of a simple principle which is: if an individual has the ability to obtain food and shelter for himself, then the individual will choose to do so. The purchase of these base goods, then, is therefore maximized by the ability of everyone to obtain such goods which increases both efficiency (more of a certain type of good can be transported to a single location at once, reducing transportation expense) and effectiveness (if everyone who wants tomatoes can buy tomatoes, then the tomatoes are less likely to become rotten). These increases represent only the first step of many that makes the Keynesian System, by necessity, the most viable Economic System of them all.

The second way the Keynesian System increases the value of an economy is by maximizing employment, which is fortunately a necessary occurrence given the increase to wages and the purchase of base goods. If more base goods are being purchased, then more base goods must be produced, distributed and sold, and it takes people to do all of this. The newly employed people now also have the ability to provide for themselves on a Physiological and Safety basis, which contributes even more to the economy and results in a continued increase in demand for these goods all the way to a theoretical maximum. In this case, “Theoretical Maximum,” can simply be reduced to, “Everyone gets to eat and have a warm house.”

The way that this is accomplished is by less saving and less investment in abstractions such that the vast majority of investments and savings have a tangible goal in mind, whether it be building a restaurant, factory, grocery store, hotel or anything of that nature. In other words, money will become more effective by actually being used for something rather than what is essentially a game of trying to amass the highest total in which a necessary result is money that is not doing anything.

In the meantime, workers at jobs higher than the most basic level, and specifically and immediately, those closest to the most basic level will be in a position to demand a wage increase such that their wages (given their skill level) remain constant, from a percentage standpoint, with the increase in raises seen by workers at the most menial jobs. The result of this will be more disposable income for these people enabling them to make purchases that fulfill higher desires than the mere acquisition of goods to meet their Physiological and Security needs. This disposable income will manifest itself in these people going out to the theater, concerts, restaurants, taking vacations, upgrading their vehicles and other purposes that are too numerous to list.

The necessary result of the additional disposable income will be more employees to keep up with the demand at such locations at which the income is being disposed. This provides another boost to the market for base goods, and quite possibly, disposable goods, and it just goes on and on as workers at higher positions and occupations (other than those just above menial) continue to demand wage increases to remain in-line, from a percentage standpoint, with lower workers.

The distinction between wealthy and poor will still remain, however, the goal of the Keynesian System is simply to improve what it is to be poor, or to be lower-middle class, middle-class etc. It will stop with the very rich because, even though the very rich will have less actual money, since the only money they are losing is that which was doing nothing in the first place, they do not experience any harm to their lifestyle.

The Keynesian System maintains that the money with the most value is that which is being used and that, in cases where money is going to be amassed, (saved) it should only be done for a fixed and decided purpose of investment which will result in creation and will eventually add value to the economy by becoming active. Saving money for the purpose of saving money alone is simply useless from a Macroeconomic standpoint.

The Keynesian System of Economics is simply one that seeks to ensure that all individuals have access to Physiological and Security necessities, and in so doing, increases the demand for those necessities to a theoretical maximum which is successful in maximizing demand while reducing waste. The Keynesian Model recognizes that money should fulfill its original function as an efficient and effective facilitator of trade, and that money is at its most effective when it is being quickly utilized in an economy. These increases combined with the virtual guarantee of an individual having his Physiological and Security needs met within a society increase the value of that society and how desirable an individual, both inside or outside of that society, views being a Member of that society to be. The majority of people would want to live in such a society because the ability to conduct one’s day-to-day affairs without ever having to worry about base needs or access to base goods puts every individual within that society closer to self-actualization.

Thank you for your kind attention, I now turn the floor over to BigFoot66.


(1) http://www.merriam-webster.com/dictionary/value
(2) http://psychology.about.com/od/theoriesofpersonality/a/hierarchyneeds.htm

The judges - Croupier, Scotty71 and I - have determined that under the rules since more than 72 hours have passed Bigfoot forfeits and Mission wins by default.

Both participants made fairly incisive presentations of their positions but unfortunately no arguments or rebuttals have been heard. This debate is now formally ended.

Quote: chickenman

The judges - Croupier, Scotty71 and I - have determined that under the rules since more than 72 hours have passed Bigfoot forfeits and Mission wins by default.

Both participants made fairly incisive presentations of their positions but unfortunately no arguments or rebuttals have been heard. This debate is now formally ended.

WTF

Quote: chickenman

The judges - Croupier, Scotty71 and I - have determined that under the rules since more than 72 hours have passed Bigfoot forfeits and Mission wins by default.

Both participants made fairly incisive presentations of their positions but unfortunately no arguments or rebuttals have been heard. This debate is now formally ended.

I thought he would notify you guys, I'm sorry about that. BigFoot66 sent me a PM requesting additional time, and I extended him additional time of no set duration due to his present work situation. I do not accept the forfeit.

I'm sorry about the confusion, given that he was the one requesting the time, I assumed he'd PM you guys.

We recieved no notification of request of extension. How long did you give him?

If the Judges are fine with it, the extension will be indefinite. I take BF66 on good faith that he will formulate an argument and respond as soon as reasonably possible.

i'm fine with more time...I might be slow in my judging but I'll try to look at the thread every day.

I'm good. The time constraints were artificial, if the debaters have decided to waive them then those are the conditions henceforth.

Quote: chickenman

I'm good. The time constraints were artificial, if the debaters have decided to waive them then those are the conditions henceforth.

Agreed.

I'll have it up by the end of the day Sunday. Its been nutty at work. Thank you all for your patience.

Sorry guys, I am a slow writer. I worked on it 4 HOURS yesterday and have spent another hour tonight. I promise to post it no later than monday pm, I am off work tomorrow and should be able to clean it up completely by then. Hopefully you will find it to be worth the wait.

Introduction

Economics is the study of how man allocates scarce resources, and the field is divided into two spheres, microeconomics and macroeconomics. Microeconomics (micro) is the study of how individual actors allocate scarce resources through production, consumption, and trade. Macroeconomics (macro) is the study of how resources are distributed within the context of the entire society. Economists like Paul Krugman who write articles in the newspaper or appear on TV are almost always discussing macroeconomic topics, concepts like GDP, Stimulus, Balance of Trade, Currency Markets, etc are all macro. While there is very little controversy in microeconomics, there are many schools of macroeconomic thought and government policy is predicated on macroeconomic analysis. I do not hold an economics degree, but my arguments here are based on my understanding of the Austrian School of economics. I also want to remind the reader that economies are very complex. Please understand that I may oversimplify some concepts in order to explain them well. My examples are especially simplified and I assume people do not engage in force or fraud. Keep in mind that I speak ceteris paribus, holding all other factors constant.

In a micro analysis, it is clear that rational people acting in their own self interest leads to the best total results for those involved. If I offer to trade my ham sandwich for your cookies, I must prefer the cookies to the sandwich, and if you accept you must prefer the ham sandwich to the cookies. We are both be better off if we trade, and I have referred to this before as an economic miracle because value is created, and in this case without any additional goods or services being produced. I argue that what we call “the economy” is simply 300 million people engaging in production, consumption, and mutually beneficial exchanges. Since each individual trade in a free economy is voluntarily entered into and improves the position of all parties involved, taken together the entire free economy represents the most good for the most participants in the market. Just like no system of bets can overcome the house edge in a negative EV game, any set of free chosen contracts must be beneficial to all parties involved. The Keynesian argues that my analysis is accurate on the micro level, but the market on the macro level is affected by the ‘animal spirits’ in man. The bull and the bear affect consumer confidence and ultimately leads to the business cycle in the larger economy.

Keynesian Business Cycle Theory

At some point during a healthy market people start to lose faith and start saving more and spending less. Maybe a young couple puts another $100 in the bank instead of going out for cocktails with friends one weekend. The drop in consumer spending leads to less income for the bar they would have gone to. This causes the bar to spend less on alcohol, and the alcohol company spends less on grain, so the farmer spends less on…. etc. Lower demand leads to lower income leads to lower demand: the economy gets worse and worse. Employees are laid off as production decreases. As more and more of the work force is unemployed the cycle feeds on itself.

The Keynesian Solution

Let’s say the economy is capable of producing $100,000 worth of goods per year but consumer confidence has shrunk so that people only are spending $70,000 per year and stuffing the rest in the bank or under the mattress. The society is missing out on $30,000 worth of production because people and resources sit idle, and the Keynesian solution is to find a way to artificially pop up demand. While the situation will usually sort itself out eventually over time, we can get a free lunch of sorts by having the government borrow money to pay those unemployed people to be productive. The classic example is New Deal era programs like the CCC, but the government does not have to directly employ people, just about any spending will work. How many of us (especially in Vegas) have a brother in law who was a damn fine welder but hasn’t been able to find work since 2009? Why not have him work on building a new wing at the local elementary school instead of watching Judge Judy all day until the economy fixes itself? Not only do we end up with a better school, but now he will spend more money at the restaurant, which will then be able to employ another bartender, who will gamble at the casino, which will…. This idea that government stimulus money will continue to benefit people as it changes hands is called the Keynesian Multiplier, and it means that $1 in government stimulus spending will actually increase the total production in the economy $3 or $4 because of the ripple effect from the dollar moving from pocket to pocket.

Note that while Keynes did write about the ‘animal spirits’ theory, Keynesians will also argue that a contraction in the supply of money coupled with ‘sticky prices’ can play the same role as the drop in consumer confidence. In classical economics, we assume that prices are directly related to the amount of money in the economy. Simply printing additional money does not make society any wealthier as prices will rise accordingly. Imagine that the supply of money were magically sliced in half overnight (while still being distributed as it was before). In the long run, we would not be any poorer than we were before, but it would cause some initial confusion in the economy and then prices/wages would fall in half as well. The Keynesian argues that the short term ‘confusion’ will cause the economy to seize up considerably and could lead to a depression because prices and wages are ‘sticky‘. For example, a produce distributor might have futures contracts with farmers to buy corn at $10 a bushel 8 months from now, or a union labor contracts commit an employer to continue paying his workers a certain wage (with built in raises!) for the next four years. In addition to contractual agreements, there is a sort of inertia in the movement of prices. Think of the economy as like a 1960’s era grocery store where the items are all labeled with a price sticker, it takes a lot of time and resources to reprice things. So the reduction in the supply of money has the effect of temporarily raising real prices which leads to a decrease in demand. It is this decrease in demand that Keneysians claim causes a recession.

Introduction to Austrian Theory

The Keynesian system is what so many of us assume is real economics. As Nixon famously said, “We are all Keynesians now.” The major fallacy made in the Keynesian analysis is that all demand for goods is lumped together in one big number called AGREGATE DEMAND. They do not make enough of the distinction between consumer goods and investment goods, like factories, or destructive spending like war. Pure free markets is not only the most moral way to organize men, it is also the system that maximizes the creation of value.

Keynesians typically agree with me that during a period of healthy growth in an economy, minimal government intervention in the marketplace is best. We might disagree on topics like welfare payments to the disabled, for example. But both schools of thought teach that a free market typically steers the economy pretty well during periods of growth, and that a more productive economy is generally better for all participants of the economy (compare this to Marxist thought, which teaches that a more productive economy harms laborers). We differ radically on how to create more value for society during recessions. The Keynesian diagnoses the problem, as I outlined above, as a drop in aggregate demand caused by a drop in consumer confidence, a contraction in the supply of money, or both. The boom period reflects healthy growth and the bust period is an unhealthy time that needs to be countered so that the economy can reach its full productive capabilities. The analysis is exactly backwards, we should fear the boom and allow the bust to run its course. Please note that the boom period of the boom bust cycle is not the same thing as a period of healthy growth.

The Role of Prices in an Economy

When I refer to ‘the price’ here, I am referring to the price level for a good that clears the market and leaves neither shortages nor excesses. At a lower price consumers demand more and producers supply less of a product, and as the price rises the amount demanded decreases and the amount supplied increases. Consider the table below which compares the number of ham sandwiches that would be demanded and produced each day in Fernly, NV at various price points.

Price	Amount Demanded	Amount Supplied
$5	180	30
$7	110	40
$9	60	60
$11	25	120

In our example it is clear that the price will settle at $9. Exactly 60 people will successfully try to buy a sandwich, and the producers will exhaust their stock. Imagine that the mayor of Fernley, hoping to win the favor of the hungry ham consumer, told the chief of police in Fallon to arrest anyone caught selling ham sandwiches for more than $7? Where 60 people used to go to the deli each day, now 110 people will come to buy lunch. And where 60 sandwiches were produced, now only 40 are. Perhaps one seller cannot profitably offer ham sandwhiches at $7 each and moves into the lucrative, unregulated world of pastrami. This creates a huge shortage and 70 consumers are disappointed. Not only are more people interested in buying sandwiches, but producers lose interest in making them as they have become less profitable. The mayor, though, gives speeches where he tells his constituents how he has saved the town $80 a week on its lunch, and he condemns the evil deli owner for not being prepared to serve ham the hungry citizens of Fernley.