I just realized something. The things I subscribe to here on CZcams are ridiculously diverse. Case in point, before clicking on this video about economics, I just finished listening to a Finnish polka that appeared in my subscription box. Go figure!
Is it only a question of time? I don't think so. I think there is also a question of risk. Even if the "future house" is built in one second after my purchase, I would value more the "present house", because there is always a risk of manufacturing defect on the "future house" which is not on the "present house".
What youre describing is the entrepeneurial part of the firm, and while capital goods ownership and entrepeneurship often ( always, really) overlap, they are different things.
Haha, funny how Bob just slips this morbid "play tag with a spear" joke @ 9:05 but nobody even reacts. I guess they all played tag with a spear before and find it absolutely normal :O
@MustangManiac1115 Interests rates would play a role. When savings is high, interests rates would be low because there are excess reserves and banks could lend out money. This money can then be lent to businesses and people who need capital to commit to projects where new technology will make their businesses more productive- lowering the cost of producing items, lower the price of goods in general, and therefore, society wins through this increased productivity.
@yared94 thanks. I see what you are saying, but I think Murphy oversimplifies there. Consuming that money very well could have been the better use if the savings went into a bad wealth-wasting project. If im thinking about that right.
Absolutely incredible that someone would spend so much time explaining that which should require no explanation. Interest is exactly that interest. Its the value to the consumer its utility expressed as a percentage. You need a loan? Interest me, make it worth my while. You want a house built now? Interest me. You want your grain milled? Interest me. Make my eyebrow rise with interest this is why so few people are interested in economics its soooo boringly simple. The utility of watching this video is an expression of my colossal boredom.
Perhaps if you've never taken an economics class, or met a socialist. The problem is that mainstream economics to a certain degree, and socialists fully, do not comprehend this. A lot of people don't either, come to think of it. Also, there's value in systematizing common sense so it can be applied more generally.
Well.... Understanding exactly what interest is and that is specifically is NOT only related to loans, can make one understand that the interest rate is not something that should puld be arbitrarily set by a central bank. In fact the interest rate reflects a price of something ie money. Understanding how central banks screwing with the interest rates screws everything up has helped me understand bubbles, boom and bust cycles
+Robert Brothers Surplus permits perpetuity. That is about it. My belief, is that the science of money just isn't funded like conventional science, and is just market or economic research that most of science is isolated from. Clearly science would be better off if it prioritized its own activity, focusing on money, energy, cutting operating cost (conservation), and expanding naturally to incorporate random science at a fixed or slight and growing fraction of its overall practice. But it isn't logically organized anyway (not a criticism: that is conventional, most institutions make sense moment to moment). I guess my point is: you see how far they get with energy, but it just isn't funded or applied to achieve perpetuity/momentum.
+Robert Brothers I apologize for this wall of text if it is annoying, but here it is: As far as any moral argument, there is no society that has been dominated by cooperative people that doesn't accumulate extract (ie produce). The reason for this is pretty clear: the change of climate alters the selection and re-defines alpha-based attributes; because of this, mutualism/symbiosis/natural_egalitarian tribal capitalism begins to dominate in areas of poor survivability, and that precedent leads to recognizing consent between people. There are no peaceful tribes that don't farm (none I have seen record of at least). It also is pretty intuitive, since just as it is with the appendix, or the eyes of a mole/bat/etc, anything superfluous just erodes. It is just a bunch of central limits piled on each other that makes up most biological action. This does not negate anything about the complexity of human action, it can just map out parts of it to look at it the same as a hive (which is all software/conceptual---e.g. pheromones superfluous). It is not organized by limits of choice in the deterministic sense--so much as the degree to which choices available deviate, and are chosen, particularly with respect to the propensity to replicate and produce anything statistically significant.
Ehh...savings accumulation leads to wealth, society-wide? This doesn't make sense to me. If the amount of money in an economy stays the same, how would a higher ratio of savings to spending lead to greater wealth without technological advances that would enable society to take advantage of the savings?
Society-wide, savings is not the accumulation of money-as you correctly noticed, the total amount of money available on the short and medium term is more or less constant-but the accumulation of resources and capital goods, _which increase in available quantity as a result from people abstaining from consumption._ Accumulating money in a piggy bank or under the mattress is merely the most convenient way for the individual to store the _value_ resulting from all the consumption he chose to forego. On the scale of the whole society, if people choose to consume less than they otherwise would, less goods get consumed, in total (and tools and capital goods in existence get less used up, due to resulting decreased usage). This surplus of _actual stuff_ [1] that would not exist if people had not chosen to _consume less_ is what makes possible to increase production. When someone decides to save by not consuming so many bagels over the next couple of years, this person will reach the end of the period with a surplus of money in his possession. Although it's common to refer in everyday situations to this extra money he accumulated as his 'savings,' in the economical perspective, the savings is the goods-bagels-he abstained from using. When a large portion of the population decides to consume less bagels over the course of the next five years, it does not follow that the same amount of bagels will get produced, and large unused batches will go to waste. As the people start to consume less bagels, the grocery stores, bakers, and delicatessens, perceiving the decline in consumption, will decrease their production levels to avoid taking losses. Some stores might close. Then, in turn, flour producers will also adjust their businesses in response to the decrease in demand. Less flour will get produced, less trucks to transport it will be used, less storage facilities will be kept in use, and so on. Some of those companies might also close. Some of the machinery used to process the wheat into flour might get repurposed or recycled. Some of the machines that are used to make the wheat processing machines might also get repurposed or recycled in response to the diminished bagel demand. Less wheat will be bought. Further down the production chain, wheat producers will notice it and likewise adjust accordingly, downward as well, decreasing resource utilization. Less farmland will be devoted to growing wheat, less machines will be used to harvest and pre-process the wheat; some farms might close. Some farmers might give up farming and change careers. All along the production chain, the contraction caused by the smaller demand of bagels causes the freeing up of resources (consumer and capital goods) that now are available to be put to other uses. Every delicatessen closed reopens as another business, perhaps a factory; every person laid off ultimately ends up working in something else; every machine repurposed or recycled will help increase the production in another sector of the economy; freed-up trucks will carry something else; tracts of land not used for growing wheat will be used by other businesses. _All_ these factors of production-labor, land, capital goods, consumer goods, would be tied up in the bagel industry by the very demand of the consumers for bagels-as they were before the consumption reduction started. Now they are freed up to be used in other enterprises. Factors of production are always scarce-labor, land, tools, natural resources; there is a finite amount of each of those, and at any given moment, in normal situations, most of it is already being employed for other purposes. In order to _expand_ production, it is necessary to _divert_ the factors of production from other activities to fuel the _new_ production. Although thorough analyses of these processes are contained in _Human Action_ and other Austrian advanced works, they are also laid out very accessibly in _How an Economy Grows and Why It Crashes_, Peter D. Schiff & Andrew J. Schiff, John Wiley & Sons, 2010. Notes: [1] Both consumer goods that do not get used, and now can be used to support people working in the additional production, as well as capital goods whose lifespan is increased.
This lecture, particularly the latter section, is very informative - thanks!
I just realized something. The things I subscribe to here on CZcams are ridiculously diverse. Case in point, before clicking on this video about economics, I just finished listening to a Finnish polka that appeared in my subscription box. Go figure!
Mind = blown
I want an apple tree that shoots out apples, lol.
Is it only a question of time? I don't think so. I think there is also a question of risk.
Even if the "future house" is built in one second after my purchase, I would value more the "present house", because there is always a risk of manufacturing defect on the "future house" which is not on the "present house".
What youre describing is the entrepeneurial part of the firm, and while capital goods ownership and entrepeneurship often ( always, really) overlap, they are different things.
Always intrigued by Austrian Economics but...
Keep the beard, brah.
Haha, funny how Bob just slips this morbid "play tag with a spear" joke @ 9:05 but nobody even reacts. I guess they all played tag with a spear before and find it absolutely normal :O
@MustangManiac1115 Interests rates would play a role. When savings is high, interests rates would be low because there are excess reserves and banks could lend out money. This money can then be lent to businesses and people who need capital to commit to projects where new technology will make their businesses more productive- lowering the cost of producing items, lower the price of goods in general, and therefore, society wins through this increased productivity.
Shh, you're blowing a hole in the whole Austrian monetary theory.
@yared94 thanks. I see what you are saying, but I think Murphy oversimplifies there. Consuming that money very well could have been the better use if the savings went into a bad wealth-wasting project. If im thinking about that right.
Absolutely incredible that someone would spend so much time explaining that which should require no explanation. Interest is exactly that interest. Its the value to the consumer its utility expressed as a percentage. You need a loan? Interest me, make it worth my while. You want a house built now? Interest me. You want your grain milled? Interest me. Make my eyebrow rise with interest this is why so few people are interested in economics its soooo boringly simple. The utility of watching this video is an expression of my colossal boredom.
Perhaps if you've never taken an economics class, or met a socialist. The problem is that mainstream economics to a certain degree, and socialists fully, do not comprehend this. A lot of people don't either, come to think of it. Also, there's value in systematizing common sense so it can be applied more generally.
Well.... Understanding exactly what interest is and that is specifically is NOT only related to loans, can make one understand that the interest rate is not something that should puld be arbitrarily set by a central bank. In fact the interest rate reflects a price of something ie money. Understanding how central banks screwing with the interest rates screws everything up has helped me understand bubbles, boom and bust cycles
3:10 - Awww Guido.. LOL!
most people consider it absolutely normal. We call these people statists =P. Sorry i know ur comment is 2 years old but i couldn't resist.
excelent
Federal Gorverment needs to protect right of prospiraty.
If scientists just treated money like energy it would make perfect sense. Although-it may be more of a bureaucratic issue (no idea).
+Robert Brothers Surplus permits perpetuity. That is about it. My belief, is that the science of money just isn't funded like conventional science, and is just market or economic research that most of science is isolated from. Clearly science would be better off if it prioritized its own activity, focusing on money, energy, cutting operating cost (conservation), and expanding naturally to incorporate random science at a fixed or slight and growing fraction of its overall practice. But it isn't logically organized anyway (not a criticism: that is conventional, most institutions make sense moment to moment). I guess my point is: you see how far they get with energy, but it just isn't funded or applied to achieve perpetuity/momentum.
+Robert Brothers
I apologize for this wall of text if it is annoying, but here it is:
As far as any moral argument, there is no society that has been dominated by cooperative people that doesn't accumulate extract (ie produce). The reason for this is pretty clear: the change of climate alters the selection and re-defines alpha-based attributes; because of this, mutualism/symbiosis/natural_egalitarian tribal capitalism begins to dominate in areas of poor survivability, and that precedent leads to recognizing consent between people. There are no peaceful tribes that don't farm (none I have seen record of at least). It also is pretty intuitive, since just as it is with the appendix, or the eyes of a mole/bat/etc, anything superfluous just erodes. It is just a bunch of central limits piled on each other that makes up most biological action. This does not negate anything about the complexity of human action, it can just map out parts of it to look at it the same as a hive (which is all software/conceptual---e.g. pheromones superfluous). It is not organized by limits of choice in the deterministic sense--so much as the degree to which choices available deviate, and are chosen, particularly with respect to the propensity to replicate and produce anything statistically significant.
@StrafingMoose Yeah I noticed that lol
1 person hates capital.
The reason this is wrong is because savings do not cause investment, and investment is not constrained by savings.
wtf ...i thought it was eddy murphy hahaa
Ehh...savings accumulation leads to wealth, society-wide? This doesn't make sense to me. If the amount of money in an economy stays the same, how would a higher ratio of savings to spending lead to greater wealth without technological advances that would enable society to take advantage of the savings?
Society-wide, savings is not the accumulation of money-as you correctly noticed, the total amount of money available on the short and medium term is more or less constant-but the accumulation of resources and capital goods, _which increase in available quantity as a result from people abstaining from consumption._
Accumulating money in a piggy bank or under the mattress is merely the most convenient way for the individual to store the _value_ resulting from all the consumption he chose to forego.
On the scale of the whole society, if people choose to consume less than they otherwise would, less goods get consumed, in total (and tools and capital goods in existence get less used up, due to resulting decreased usage). This surplus of _actual stuff_ [1] that would not exist if people had not chosen to _consume less_ is what makes possible to increase production.
When someone decides to save by not consuming so many bagels over the next couple of years, this person will reach the end of the period with a surplus of money in his possession. Although it's common to refer in everyday situations to this extra money he accumulated as his 'savings,' in the economical perspective, the savings is the goods-bagels-he abstained from using.
When a large portion of the population decides to consume less bagels over the course of the next five years, it does not follow that the same amount of bagels will get produced, and large unused batches will go to waste. As the people start to consume less bagels, the grocery stores, bakers, and delicatessens, perceiving the decline in consumption, will decrease their production levels to avoid taking losses. Some stores might close. Then, in turn, flour producers will also adjust their businesses in response to the decrease in demand. Less flour will get produced, less trucks to transport it will be used, less storage facilities will be kept in use, and so on. Some of those companies might also close. Some of the machinery used to process the wheat into flour might get repurposed or recycled. Some of the machines that are used to make the wheat processing machines might also get repurposed or recycled in response to the diminished bagel demand. Less wheat will be bought. Further down the production chain, wheat producers will notice it and likewise adjust accordingly, downward as well, decreasing resource utilization. Less farmland will be devoted to growing wheat, less machines will be used to harvest and pre-process the wheat; some farms might close. Some farmers might give up farming and change careers.
All along the production chain, the contraction caused by the smaller demand of bagels causes the freeing up of resources (consumer and capital goods) that now are available to be put to other uses. Every delicatessen closed reopens as another business, perhaps a factory; every person laid off ultimately ends up working in something else; every machine repurposed or recycled will help increase the production in another sector of the economy; freed-up trucks will carry something else; tracts of land not used for growing wheat will be used by other businesses. _All_ these factors of production-labor, land, capital goods, consumer goods, would be tied up in the bagel industry by the very demand of the consumers for bagels-as they were before the consumption reduction started. Now they are freed up to be used in other enterprises.
Factors of production are always scarce-labor, land, tools, natural resources; there is a finite amount of each of those, and at any given moment, in normal situations, most of it is already being employed for other purposes. In order to _expand_ production, it is necessary to _divert_ the factors of production from other activities to fuel the _new_ production.
Although thorough analyses of these processes are contained in _Human Action_ and other Austrian advanced works, they are also laid out very accessibly in _How an Economy Grows and Why It Crashes_, Peter D. Schiff & Andrew J. Schiff, John Wiley & Sons, 2010.
Notes:
[1] Both consumer goods that do not get used, and now can be used to support people working in the additional production, as well as capital goods whose lifespan is increased.