Why does an economy exist

antrobus

CLAPTON wrote: »

assuming an 'economy' involved the idea of exchange of goods and services (with or without money), then one an easily envisage economies that don't encompass comparative advantage but simple preference. ...

The fact that you can "envisage" such an economy, does not mean to say that any such economy has ever existed. Your hypothetical constructs are your own concern; I was merely answering the question that was asked.

Nobel laureate Paul Samuelson (1969) was once challenged by the mathematician Stanislaw Ulam to "name me one proposition in all of the social sciences which is both true and non-trivial." It was several years later than he thought of the correct response: comparative advantage. "That it is logically true need not be argued before a mathematician; that is is not trivial is attested by the thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them."[SIZE=-2][/SIZE]

http://www.wto.org/english/res_e/reser_e/cadv_e.htm

CLAPTON

antrobus wrote: »

The fact that you can "envisage" such an economy, does not mean to say that any such economy has ever existed. Your hypothetical constructs are your own concern; I was merely answering the question that was asked.

Nobel laureate Paul Samuelson (1969) was once challenged by the mathematician Stanislaw Ulam to "name me one proposition in all of the social sciences which is both true and non-trivial." It was several years later than he thought of the correct response: comparative advantage. "That it is logically true need not be argued before a mathematician; that is is not trivial is attested by the thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them."[SIZE=-2][/SIZE]

http://www.wto.org/english/res_e/reser_e/cadv_e.htm

I was unaware that slave societies never existed.

antrobus

CLAPTON wrote: »

I was unaware that slave societies never existed.

The existence or non-existence of slavery has no bearing on comparative advantage; it simply determines who gets the benefit of it.

CLAPTON

antrobus wrote: »

The existence or non-existence of slavery has no bearing on comparative advantage; it simply determines who gets the benefit of it.

it is possible that a slave or warrior economy produces less goods and services that a economy comprising free people

that is, the economy of comparative advantage is sacrificed so that the few do very well and the many do very badly.

it is doubtful whether your view of comparative advantage was the driving force in the USSR.

Thrugelmir

CLAPTON wrote: »

so I may prefer to build fishing boats rather than fish even though I may be equally good at both : similarly people may be willing to give me fish in exchange for boats even though they may be equally proficient at both

there is a benefits to all parties in that they 'enjoy' their work better but that is not an economic advantage and does no necessary increase total 'income'.

The benefit of people enjoying their work results in higher productivity. That's a known fact.

CLAPTON

Thrugelmir wrote: »

The benefit of people enjoying their work results in higher productivity. That's a known fact.

irrelevant and incorrect

dtsazza

Other: Because of nomenclature.

We have defined the word "economy" to mean, more or less, the subset of all human activities that relates to generation or trade of useful commodities. And so (since we'd all die if no-one generated any useful commodities), there will always be "an economy" in any possible human society.

But I reject the idea that it exists as a specific entity, with a particular reason/motivation for existing. It just is. It's the sum of many millions of individual decisions about whether to buy/sell/work in this particular instance.

I suppose in that respect, the economy exists because e.g. Mrs. Miggins enjoys bread, and has money/something else of value, and knows a person who has excess bread, and they are both willing and able to negotiate a trade of one for the other. As a result of this "the economy" has now grown by one sale of bread (or the GDP of the baked goods sector has increased by £1.19, or whatever).

But on a macro scale I don't think that really tells you anything about the actual decisions of the people involved, or the actual impact on their lives. "The economy" is just an observation, a metric. It's not an input to anything*.

*Well, except government policy perhaps. But I still believe that it shouldn't be; that it's just a very poor proxy for the reality that is peoples' decisions.

dtsazza

CLAPTON wrote: »

so I may prefer to build fishing boats rather than fish even though I may be equally good at both : similarly people may be willing to give me fish in exchange for boats even though they may be equally proficient at both

there is a benefits to all parties in that they 'enjoy' their work better but that is not an economic advantage and does no necessary increase total 'income'.

I disagree. Just about every academic-level discussion of economics revolves around the idea of "utility" - which is, roughly, "happiness". People are not assumed to act to maximise their money, they are assumed to act to maximise their utility. (People only want money because they can convert it into utility by buying things they like/need, anyway.)

Which means, taking a lower-paid but more enjoyable job is entirely in-line with economic advantage, as well as common sense.

In fact if anyone tries to assess an economic decision by only looking at money, then they're short-sighted and doing it wrong (for the reason you pointed out).

CLAPTON

dtsazza wrote: »

I disagree. Just about every academic-level discussion of economics revolves around the idea of "utility" - which is, roughly, "happiness". People are not assumed to act to maximise their money, they are assumed to act to maximise their utility. (People only want money because they can convert it into utility by buying things they like/need, anyway.)

Which means, taking a lower-paid but more enjoyable job is entirely in-line with economic advantage, as well as common sense.

In fact if anyone tries to assess an economic decision by only looking at money, then they're short-sighted and doing it wrong (for the reason you pointed out).

If it were a serious discussion then we would clearly need a decent definition of 'economy'. In the sub thread we would need a clear definition of 'competitive advantage' too.
Too wide a definition then it all becomes a bit meaningless, too narrow it reduces to how many angels can dance on the end of a needle.

It is certainly amusing to note your comments on the idea of 'utility' and contrast that with the typical economists total devotion to GDP (i.e the monetary view only).
So any discussion of relative merit of say house building, immigration etc is strictly confined to the monetary value of the matter and economists rigorously exclude any discussion of 'utility'.

Generali

CLAPTON wrote: »

If it were a serious discussion then we would clearly need a decent definition of 'economy'. In the sub thread we would need a clear definition of 'competitive advantage' too.
Too wide a definition then it all becomes a bit meaningless, too narrow it reduces to how many angels can dance on the end of a needle.

It is certainly amusing to note your comments on the idea of 'utility' and contrast that with the typical economists total devotion to GDP (i.e the monetary view only).
So any discussion of relative merit of say house building, immigration etc is strictly confined to the monetary value of the matter and economists rigorously exclude any discussion of 'utility'.

Prices act as a pretty good proxy for utility if you believe in Utility Theory which I don't.