Jay Hanson: Here is the analogy of a town as a commons: Suppose the residents of a town use 1,000 rolls of toilet paper per week. This CAPACITY of the market is 1,000 rolls. Further suppose one must sell 400 rolls a week to stay in business. Currently the market is served by two local businesses. Now two new businesses move into town to compete for the toilet paper business. Will the residents double their usage? Or will some of the businesses fail? The same principle holds for job markets.... In essence, the unrestricted exploitation of everything by capitalism destroys the social and physical premise of capitalism itself. Jay -- http://dieoff.org/j.htm Hi Jay, Your toilet paper example is certainly odd. Toilet paper probably is a textbook example of an inelastic supply/demand curve: people will buy a fixed amount regardless of price. Cutting the price in half (or doubling it) will have virtually no effect on the amount bought per person. The new company cannot expect to enter a market that is currently fully served UNLESS they have some radical new innovation that will capture the market from the current suppliers. The market economy is designed to discourage investment in goods with no market: it should have encouraged the new T.P. company to look for needs that were NOT currently being met. Paper making is a big industry in Wisconsin, and there is the Institute of Paper Chemistry in Appleton. So I take some interest in paper, and even interviewed for a job with a research project at UW Madison on new ways to make paper from wood pulp using enzymes. While paper was invented by a Chinese bureaucrat in 105 AD, it did not get to Europe until the Middle Ages. It was made one sheet at a time and was thus quite expensive, until the development of the continuous-web Fourdrinier paper machine in 1799. But this could be used to make only relatively tough newsprint: soft toilet paper is much more of a problem to mass produce. This reminds me of the situation that existed some years ago (1960's or 70's?), when the US had very good toilet paper relative to the rest of the world. In Europe it was very rough. Somewhere between burlap and sandpaper. When we went to Israel we would pack an extra suitcase with toilet paper for friends there, since the local kind was of the European type. If your hypothetical paper company made the soft US style while only the rough European style was available, the outcome would have been different. And the "standard of living" of the community would have been improved! ANYONE out there remember those good old GLORY DAYS when the US was the world leader in toilet paper technology?? DOING LAUNDRY Jay again: Once upon a time, there was a island where everyone was unemployed -- no economic activity whatsoever -- but the people were growing their own food and doing OK. Then one day the Prince sent his lackey the economist to the island to show the people how they could "get their economy going." Economists are liars by training, so naturally most people who listen to economists are deceived, and this particular case was no exception. The economist explained to the residents that if they simply washed each other's clothes, they could earn money and their economy would grow about a million percent. The people fell into the trap: the economist was telling them what was good for the economy; they thought that meant what would be good for the people. Well, everyone started washing everyone else's clothes, earning lots of money. No one noticed anything was wrong until the end of the year when the people had to pay their taxes. Obviously, they couldn't, and the Prince foreclosed on the people's homes. The economy was about a million percent better off, but the people were much worse off. Clearly, "what's good for the economy" is a fundamentally different question than "what's good for the people." How bad will things get before we start asking the right questions? Jay -- http://dieoff.org/j.htm Hi, On your example of the islanders doing each others laundry. If they are all equally good/fast/interested in doing laundry, there is no gain from doing each others laundry, and then paying taxes on the INCOME from what they get, but not getting a deduction for what they SPENT. So why would they do this? But lets look at the more likely possibility: SOME are very good and fast at laundry (and/or don't mind doing laundry), while others are slow/ hate it, but are good at other things like fishing or getting coconuts. Now a "specialization of labor" could benefit everyone. And they could all be ahead even if there was a "small" tax on the income they received from the work they did. But a high tax on their incomes would offset and even eliminate the advantage. I see a different lesson here than you do. Finally, I don't see any connection between either of these cases (Toilet paper and laundry) and the "commons" problem. ,,,,,,, _______________ooo___( O O )___ooo_______________ (_) jim blair (jeblair@facstaff.wisc.edu) For a good time call http://www.geocities.com/capitolhill/4834 Jay Hanson: >Let's see if I can make my example a little easier > for the economists on this newsgroup. (All the > training has really made thinking difficult for > them. ) > >Suppose person # 1 washed clothes for #2. >#2 mows the lawn for #3. >#3 runs daycare for #1. > >How many people do I have to put in the loop before it make > good "economic sense". Hi Jay, Well if they are all equally good/interested in all 3 activities, then there is no gain. But even if they are all equally good and fast at each, if #1 loves to wash clothes and #2 hates to wash and does not like to be around kids, but rather enjoys yard work, while #3 really likes kids, then ALL will be happier if #1 washes clothes for the others while #2 mows all three yards while #3 looks after all the kids. The kids probably also benefit from both playing with each other AND haveing someone who likes them looking after them. Note that since they are all equally fast, there is no productivity gain here, and the benefits to each will not show in any economic figures. As you have pointed out, the GNP is not a complete measure of "well being". But if the people are ALSO faster/better at what they enjoy than at what they dislike, then the increases in productivity (output per hour) will show in the figures that economists collect. Gains from this "specialization of labor" can occur with as few as 2 people. As in "you catch some fish, and I will pick some fruit and berries, and we will have them all for dinner". But the larger the group, the more the potential gain. The US has higher living standards than most of the rest of the world partly because it has been the largest zone of "free trade". It looks like Europe has finally figured this out and is rapidly trying to catch up, by lowering trade barriers and adopting a common currency. A "Global Economy" offers the most potential gain.