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Monday, June 09, 2008

Does Consumption Need to Drop?

The question is answered here.

Also, find out if fair trade is a fair deal.

7 comments:

  1. Great article Gene.

    "Things become resources when acting man conceives of how he can employ them to further his ends."

    This is one of my favorite concepts. When I talk about resources with people I meet it is clear to me they totally miss most of my points because they have no idea this is where I am coming from. If I try to explain the above to them they seem to follow but only apply it the resource I use in the example...and even then they will go on to violate the concept we just agreed was 'true'. It never ends.

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  2. I enjoyed both those articles very much. One thing I'm not sure I understood: "I am using “profit” here in the accounting sense, meaning an excess of income over expenses, and not in the economic sense of an above-normal return on capital." In the economic sense, if prudent use of capital in some economic environment produces a return of 10%, does this mean that a return of 10% is profitless, and that a return of 15% shows a profit of 5%?

    What's up with tinyurl.com, upon which you seemed to rely greatly? I've run into it somewhere else recently in connection with software.

    How about that coffee that has to be shat through a lynx (or some sort of feline) and sells for $100 a pound? Let the Fair Traders set up a huge lynx farm and distribute the lynxes to the indigent coffee growers. Who said economics was hard?

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  3. Wabulon,

    In the economic sense, if prudent use of capital in some economic environment produces a return of 10%, does this mean that a return of 10% is profitless, and that a return of 15% shows a profit of 5%?

    I think so, yes. Economic profits are returns above what you could otherwise get by investing capital in an equally risky venture.

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  4. Mischa: thanx.

    In re 'tinyurl': I looked it up. I understand now.

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  5. Erratum: for "Mischa" read "Micha."

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  6. Yes, Micha is right -- setting aside the issue of risk, let's say you could invest in T-Bills at 4% per annum. Instead, you open a business the yields you 3%. You have suffered an (economic) loss of 1%.

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