Thursday, December 01, 2011

Right wing economics in a nutshell

Okay, first of all, economies are like magic zoos, see. There are lions and tigers and bulls and bears, oh my, and stuff goes in and stuff goes out and like everybody lives happily ever after and such. So how do these "economy" thingies work? Well, first of all, meet the Free Market Fairy:

Now, the first thing the Free Market Fairy does is, like, jizz magic free market fairy dust all over the place by waving her (his?) magic wand around. This free market fairy dust is then gathered together by the Invisible Hand (no picture, because the Invisible Hand is, like, invisible, like God and Dick Cheney's conscience and stuff like that), which turns it into magical Competition Unicorns which then excrete magical substance called Choice that makes all goods cheap and widely available. Here is a picture of a Competition Unicorn:

Now, as you can see, the magical substance is excreted at the nether end and then consumers get all the benefit of this "Choice" thingy, which is, like, rainbows and sunshine and puppy dogs, oh my, and guarantees that you'll always get great service at a great price, sort of like those TV preachers who guarantee that if you send them a million billion dollars you'll go to a place where magic unicorns live and some hairy old dude has a lot of mansions for everybody to live in.

So anyhow, these magic unicorns poop this "choice" stuff and then we get all the benefits of low prices and good service. Like, at my house, I have a lot of this Choice stuff when it comes to high speed Internet -- I have Comcast, and I have, err, Comcast. Hmm. I must be wrong, because these magic Competition unicorns are EVERYWHERE, even though nobody's ever seen them outside of narrow marketplaces for consumer baubles, and thus there's ALWAYS a choice, just like my choice between Comcast and, err, Comcast, for high speed Internet. The Competition Unicorn *does* exist, like Santa Claus, magically bringing gifts to all the deserving people. And if you don’t get gifts from this magic competition unicorn, why, it just means you’re a bad person and probably deserve to get coal in your Christmas stocking, ho ho ho!

And that's right wing economics in a nutshell. Tomorrow, boys and girls, we'll talk about right-wing biology. That's even stranger than right-wing economics... like, *really* strange, as in, it's a wonder that right-wingnuts ever manage to reproduce. See ya!

-- Badtux the Snarky Penguin


  1. It makes a nice fantasy world to imagine, the Glibertarian econodream. And when the Real World is revealed to operate nowhere near like what their imaginary one does, their inevitable answer is that the Real World is just doing things wrong, that everything would be perfect if the evil government wasn't preventing more magic unicorn skittleshit from being spread around.

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  3. @purplepenguin The problem is that in the so called "free market", even without government intervention, monopolies form anyways. At least when the government forms one, they usually retain some control over service and price. I wont go into the specific reasons it is sometimes beneficial to the public to have government created and controlled monopolies but those usually occur in places where the free market has failed to create the options that are promised by the free market.

  4. At any rate, I can think of dozens of areas where the free market has failed.

    The primary one that comes to mind this morning being health care. For me the goal is that 100% of people have access to basic health care. I just don't see that happening in any kind of unregulated health care market.

    One thing that is important to remember too is that economists tend to develop their theories within a certain context. But then the world changes and what worked in the past doesn't work anymore. The more I think about it, the more I think that when it comes to macroeconomic public policy, what is good is flexibility of ideas. I have a hard time with it sometimes myself because I am a full on Keynesian but Tux here can probably elaborate on why even though the theories are sound (and have been proven to work in many situations), a Keynesian approach isn't best in every situation.

    So yeah, laissez-faire capitalism has had successes and in many situations brings about the best outcome (maximizing utility which is different than maximizing GDP). But clearly it doesn't work always.

  5. Yay Bukko! And just as you predicted, a Glibertarian showed up to blame it on the evil mean Gubment.

    Uhm, Purple, no. My local government is *prohibited* from granting a monopoly to any Internet provider. If an Internet provider wished to start up and provide high speed Internet to my neighborhood, they could do so with no interference from my local government. In fact, there are *other* neighborhoods in my city where there is no Comcast Internet service at all and only AT&T Internet service. And there are a very few neighborhoods served by different providers who pulled their own fiber into those neighborhoods for reasons of their own (like, say, they have a network center in that neighborhood) and then resold it to nearby neighbors for some extra return on investment.

    So why is Comcast the only high speed Internet provider in my neighborhood? The core issue is that it simply would not be *profitable*. Let's assume that my neighborhood has 100 homes in it that will purchase high speed Internet service and that it costs $5,000 per month fixed costs to provide Internet service to my neighborhood (this fixed cost is the cost of installing and maintaining a network drop to a POP in my neighborhood and the cost of paying for bandwidth for that drop). Also assume it costs $500 to install a drop to a specified home, and that studies have determined that people won't pay more than $60/month for Internet service. So Comcast was the *first to market* in my neighborhood, managing to take advantage of infrastructure they already had present to get service from those 100 homes at $60 month and is turning $6000/month, meaning they're making $1K/month profit from providing Internet service to my neighborhood.

    Now, let's say a second Internet service wanted to come to my neighborhood. Now, most people don't care who they get Internet service from. They'll buy it from the cheapest vendor who provides the desired service. So... this second service comes in and provides service for $50. Comcast then drops its *own* price to $50. The vast majority of people don't switch to NewInternet, they stick with Comcast. NewInternet can't make money in my neighborhood because they'd need to sign up 100 people to break even at $50/month, and they can't -- too many of those people are staying with Comcast. So NewInternet never comes to my neighborhood -- due to the high fixed infrastructure cost required to come to my neighborhood and the fact that Comcast got there first, it is simply impossible to make money. Which, I might point out, is the primary reason businesses operate. It's called *capitalism*, businesses aren't charities, remember?

    Which points out the problem with competition ponies and their choice poop -- this whole scheme assumes two things: 1) That the majority of people *care* about the difference between product A and product B, something that applies to, say, restaurant meals or automobiles (a Jeep owner and a BMW owner are two different people and will gladly pay extra to have the vehicle *they* want rather than some generic econo-car), and 2) That there are no fixed costs in providing service (and fixed amount that customers are willing to pay) that make it impossible to make a profit if two providers serve the same customer base. In short, right-wing economics requires making magical assumptions where competition unicorns poop choice turds that then magically create choice out of free market fairy dust via the operation of vigorous wand-waving on the part of the free market fairy combined with vigorous poop-slinging by the Invisible Hand. All of which is only slightly less preposterous than the notion of an invisible spaghetti monster making all this happen via His Noodly Appendages...

    - Badtux the Snarky Penguin

  6. Yay Bukko! And just as you predicted, a Glibertarian showed up to blame it on the evil mean Gubment.

    Can I front-run 'em like a high-frequency trading algorithm on a computer that squats between the floor of the NYSE and the data banks where the orders are processed, or what?

    Of course, Wall Street maggots that bribe their way into preferential access over regular stock traders, and other forms of cheating, are also not accounted for in Glibboworld, where everybody is honest and rational, eh? Must be the grubbermint's fault, that people are so rotten. Oh, my beautiful unicorny world! Spoiled by the flawed humans who actually live in it...

  7. Dude, your Free Market Fairy pic cracks me up EVERY time you post it, thanks for that.

  8. I have a number of choices and they are all about the same price of 40 bucks a month.

    I use Wavecable and the service has been good and they have an office in town, I like being able to walk into an office if I have questions.

  9. If you really want crappy service and a whitewash of free-market capitalist fairy dust look at your cell phone contract. Somewhere in that cell phone contract is a clause that says the phone company can change the fees they agreed upon anytime they want but if you cancel the contract they get to ding you for a fee.

    So you go to change to another provider? Good freaking luck. On the face of it the contract will appear to offer some sort of discount but once in service you will find yourself paying the same monthly tag for your usual phoning habits as provider A; except it will drop more calls.

    For some mysterious reason wireless phone service with internet access is affordable in India and China where the median income is a quarter of the U.S. median income but here it costs 4 times as much.

    Ain't capitalism grand.

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  11. Purple, yes you need to get a permit and pay rent to lay a cable under our streets, but state law passed back during the start of the Internet to encourage the spread of the Internet says the city can't discriminate.

    Regarding pulling cable into my neighborhood, you'd have to change the laws of physics to make it any cheaper. Trenching into a street (being careful not to disrupt any of the *other* cables under there or any sewer or water lines), carefully recording the location of your new cable so that *other* people don't cut it, carefully using a shovel to weave your cable past places where it has to cross other cables, sewer lines, etc., putting the fill back in, and then re-paving the street above so it's not too lumpy all are going to take significant amounts of money even with the modern trenching and cable pulling machines I see them using out there (and boy *are* they using them, our streets are getting kinda lumpy!).

    Do I have a solution to those pesky laws of physics -- the laws that say two physical objects cannot occupy the same space at the same time, and, especially, that pesky law of gravity? Err... NO! So basically, what we find is that when the cost of a service is dominated by infrastructure and the service is a generic bucket of bits (i.e., I get the same bits to my screen whether it's Compost, AT&T, or some other vendor that provides them) so price/bit is the only thing that matters to most people, it is a natural monopoly -- it is simply impossible via simple laws of physics for any newcomer to come in and knock out the incumbent, the incumbent might be forced to improve service and temporarily knock down prices, but eventually the newcomer will run out of money and be forced out.

    And that's why I have only one high speed Internet provider in my neighborhood. The liberal solution is to then regulate them so that they cannot abuse their natural monopoly to do evil things like redirect all Google queries to their own search engines and crap like that (thus "net neutrality" rules that you will have seen on the liberal blogosphere). And if you want to get REALLY liberal, you'll notice that your city already has a large network all over the place to control traffic signals, monitor street lamps (they all phone home when they're not working nowadays, thus why you rarely see a street lamp that's not working nowadays), and otherwise move data around, and if the service provided by the local incumbent monopoly provider is entirely unsatisfactory and no private competitor shows up to force them to improve service, you then create a *public* competitor. I mean, you already have the wires there and all, right? The City of Lafayette, Louisiana (Republican mayor, Republican city council) did that because they were completely dissatisfied with the service provided by Cox Internet, they opened their city-wide network to connection by private individuals and businesses. Cox sued them and tied that up in court for two years, but lost. Funny, once the bits started flowing Cox started providing *much* faster service to match the city's service speed (the law the city council passed allowing outsiders to access their network said they had to price it at what a private provider would charge, i.e., that it had to be profitable -- which it is -- so they're not undercutting Cox's price, they were just providing better service). The end result: Maybe 10% of the city's Internet customers signed up for the city-wide Internet service, but the rest of the city got better service out of it because Cox had to improve their service to keep from losing everything.

    And that kind of beneficial private-public competition, my friend, is a perfect example why Libertarian economic philosophy (which holds that the public running a business is *never* good) is a big Fail.

    - Badtux the Economics Penguin

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  13. Huh? If the idea is to give the monopoly incumbent some public competition, seizing the monopoly incumbent's cable is hardly the way to do that! Uhm, no. The city laid down fiber to take care of its own needs -- the new electronic water meters, the computer-controlled traffic lights and signals, and so forth. Seizing private cables wasn't necessary or, really, possible -- I mean, if you're trying to run traffic signals, the cable company hardly runs their cable to traffic signal control boxes!

    - Badtux the Baffled Penguin

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  15. Huh? Who claimed no more cables could be buried? Where? Not me! I pointed out our streets are starting to get a bit lumpy from all the cables buried beneath them, but that's hardly the same thing!

    PacBell was the first phone company in the USA to offer ADSL service. But they (or rather their descendent AT&T) only offer it if you're within 1,000 yards of one of their existing POP's. I'm not. They aren't interested in putting a POP in my neighborhood because they wouldn't be able to make money with it.

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  17. Uhm, no. Please learn to read. The laws of physics says it costs a constant number of dollars to bury a cable underneath a street, due to that gravity thingy and the weight of all the dirt and the fact you have to pay to re-pave the street afterwards. The laws of physics also say there's a physical limit to how many cables can fit under a street, but that physical limit is so high as to be negligible.

    The laws of economics, on the other hand, say that if it costs a constant number of $ to put a cable under the street and you can't get that money back via resale of its service, you won't put a cable under the street. Perhaps that's the law you were referring to? But in the case of a city government which has to put the cable under the street *anyhow* in order to run its own infrastructure... (shrug).

    - Badtux the Literate Penguin
    (Unlike, apparently, some folks 'round these parts).

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  19. No you don't, you're just pulling shit out of your ass again.

    Yes, the city *does* have cables going to each house. How the fuck do you think they monitor those new electronic water and power meters, asswipe? Telepathy?

    And if the majority of voters in a democracy DID vote to tax themselves to lay high speed Internet to their house, who are *you* to say no? What goddamned fucking un-democratic fascist arrogance, to say that *your* whims, not the will of the majority, should dictate what government should do!

    But hey, keep on pulling fucking bullshit out of your ass. This discussion is done. Rule #2.

    - Badtux the Head-shakin' Penguin

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  22. You don't get to come on my blog and make shit up about what I posted or commented. When you learn to respond to what I actually posted, vs. what your demented imagination makes up out of pure Libertardium, you're welcome to participate. But note the warning: You are NOT entitled to create your own facts. Including your own "facts" about what I say.

    - Badtux the Annoyed Penguin

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  24. Libertarians can barely cotton to public roads much less public utilities. I don't know how they manage to leave the house without stomping around and screaming "theft" every time they encounter a public service.

    Even the internet, wireless, fiber optic or landline is a complete child of federal tax dollars and is maintained and further developed by graduates of the many colleges and universities that get half or more of their income through the federal and state treasuries. Lets also mention the hundreds of thousands of technicians trained by the U.S. military.

    The problem with living in a fantasy land is that mentions of reality pull you out of character. It's like those nasty people who publicly take cell phone calls at the Renaissance Fair; how rude.

    wv: unddbe_ the emotion a conservative feels when confronted with reality.


Ground rules: Comments that consist solely of insults, fact-free talking points, are off-topic, or simply spam the same argument over and over will be deleted. The penguin is the only one allowed to be an ass here. All viewpoints, however, are welcomed, even if I disagree vehemently with you.

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