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About Subsidies...

Mensch

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Woodrow Wilson said it best when he stated, "I have always in my own thought summed up individual liberty, and business liberty, and every other kind of liberty, in the phrase that is common in the sporting world, 'A free field and no favor."
 

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Woodrow Wilson said it best when he stated, "I have always in my own thought summed up individual liberty, and business liberty, and every other kind of liberty, in the phrase that is common in the sporting world, 'A free field and no favor."
Cute. You do realize without subsidies and government intervention, there wouldn't be nuclear power and many cities would have extremely inefficient utility systems no?
 

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Woodrow Wilson said it best when he stated, "I have always in my own thought summed up individual liberty, and business liberty, and every other kind of liberty, in the phrase that is common in the sporting world, 'A free field and no favor."

It's kind of funny that you are a libertarian quoting Woodrow Wilson - Glenn Beck would call you a socialist/progressive for quoting Woodrow Wilson.
 

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Cute. You do realize without subsidies and government intervention, there wouldn't be nuclear power and many cities would have extremely inefficient utility systems no?
Maybe, Mabye not. Maybe if we paid lower taxes to the government we could afford to pay higher prices to private industry and thus private industry would have more incentive to expand and invest in things like nuclear power.
 

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Cute. You do realize without subsidies and government intervention, there wouldn't be nuclear power and many cities would have extremely inefficient utility systems no?
o

Nuclear Energy:

Forget about nuclear energy. You are right! Nuclear energy is only supported by governmental subsidies, and the market has not yet provided nuclear energy for the same reason it does provide wind energy without subsidy. It is frankly too expensive, and the returns too marginal, in order to create any sort of incentive to invest.

Utility systems:

Did you know that many utility companies have already been deregulated and privatized? This is true in SoCal, where I live. We have our history of blackouts and energy failures due to the government PARTIALLY deregulating the utilities. Read the history of Californian energy in the late 1990's and you will see what happens when the government enforces ridiculous price controls (this time, it was on top of a ridiculous partial deregulation policy that saw Californian utility companies go bankrupt because they could not sustain themselves in face of the still-existing price controls).
 

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It's kind of funny that you are a libertarian quoting Woodrow Wilson - Glenn Beck would call you a socialist/progressive for quoting Woodrow Wilson.
So, if you're a liberal democrat, and you quote Abe Lincoln (a republican) does that diminish your credibility? Wilson was a very bright man who made some very thoughtful observations that I'm willing to quote, despite the massive government institutions he helped to create. And using Glenn Beck in this argument is a fallacy only meant to bring someone else (a lunatic) into the debate who may or may not have similar political positions as myself. It would be like bringing the neo-Nazis into a debate regarding some criticism of Israeli violence against Palestinians. Neo-Nazis and criticis of fundamentalist zionism agree on certain points, but you have to take each individual separately. I AM NOT GLENN BECK, and using him in this argument is useless. I don't even like Glenn Beck and refuse to recognize his identity as a libertarian. He may call himself a libertarian all he wants, but he's not coming to my party.
 

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Subsidies make markets more efficient when a positive externality is present.

Fariness on the other hand is in the eye of the beholder. Is it unfair that markets undervalue and underproduce certain things, or is it unfair that some things will get subsidies when others will not?
 

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Did you know that many utility companies have already been deregulated and privatized? This is true in SoCal, where I live. We have our history of blackouts and energy failures due to the government PARTIALLY deregulating the utilities. Read the history of Californian energy in the late 1990's and you will see what happens when the government enforces ridiculous price controls (this time, it was on top of a ridiculous partial deregulation policy that saw Californian utility companies go bankrupt because they could not sustain themselves in face of the still-existing price controls).
Don't municipalities choose what company is going to run the utilities in their area? I can't choose what cable company I want. I can't choose what water company I want. Etc. There are a lot of problems in this field. A whole lot of problems.
 

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Cute. You do realize without subsidies and government intervention, there wouldn't be nuclear power and many cities would have extremely inefficient utility systems no?
You do realize that our power grid is on the brink and that an earthquake could basically wipe out the entire water supply for sourthern California and there is no plan to provide water for the area in case of such an event? Seems very inefficient to me.
 

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Maybe, Mabye not. Maybe if we paid lower taxes to the government we could afford to pay higher prices to private industry and thus private industry would have more incentive to expand and invest in things like nuclear power.
The problem with nuclear is primarily in start up costs and construction time lines. So paying more is rather irrelevant. While Nuclear does get kilowatt subsidies, the real issue with the industry is merely building the plants.
 

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Did you know that many utility companies have already been deregulated and privatized? This is true in SoCal, where I live. We have our history of blackouts and energy failures due to the government PARTIALLY deregulating the utilities. Read the history of Californian energy in the late 1990's and you will see what happens when the government enforces ridiculous price controls (this time, it was on top of a ridiculous partial deregulation policy that saw Californian utility companies go bankrupt because they could not sustain themselves in face of the still-existing price controls).
I meant how the utilities start. As for "ridiculous" price controls, that was the only thing stopping Enron from charging a literal million dollars a kilowatt.
 

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I meant how the utilities start. As for "ridiculous" price controls, that was the only thing stopping Enron from charging a literal million dollars a kilowatt.
I'd rather ask why was Enron in such a position to have such total control over the market. An overregulated market perhaps?
 

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drz-400

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How can a "market undervalue and underprice certain things?"
The market price does not take things into account that are positive externalities. Its why we have things like intellectual property, subsidies for education, etc.
 

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The market price does not take things into account that are positive externalities. Its why we have things like intellectual property, subsidies for education, etc.
That's a pretty bad assumption. Didn't private rail companies buy rail around their stations? They tried to internalize the positive externality. What about ballparks that buy surrounding land for parking? Companies actively try to internalize positive externalities and property owners force them to internalize negative externalities.
 

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The market price does not take things into account that are positive externalities. Its why we have things like intellectual property, subsidies for education, etc.
I don't understand. The government does serve a purpose as an umpire, to protect the right to patent ideas. Subsidies for education IS the reason why higher education has been so incredibly devalued over the years. We're pushing young people to go to college to get a B.A. in some broad philosophical subject (ie Sociology) and then the state colleges have the worst drop out rates and the students attending state schools graduate on a 6-year average. For more, watch this video (or read the book REAL EDUCATION by Charles Murray):


Not to mention the new reform of the Pell Grant which will basically allow everyone to forgive their loans and force taxpayers to foot the bill. Education IS NOT a right, anymore than my A in the classroom is a right.
 

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That's a pretty bad assumption. Didn't private rail companies buy rail around their stations? They tried to internalize the positive externality. What about ballparks that buy surrounding land for parking? Companies actively try to internalize positive externalities and property owners force them to internalize negative externalities.
Coase's Theorem, yes. Private companies can internalize externalitites if they can bargain with each other. However, this is not always possible.
 

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I don't understand. The government does serve a purpose as an umpire, to protect the right to patent ideas. Subsidies for education IS the reason why higher education has been so incredibly devalued over the years. We're pushing young people to go to college to get a B.A. in some broad philosophical subject (ie Sociology) and then the state colleges have the worst drop out rates and the students attending state schools graduate on a 6-year average. For more, watch this video (or read the book REAL EDUCATION by Charles Murray):

Not to mention the new reform of the Pell Grant which will basically allow everyone to forgive their loans and force taxpayers to foot the bill. Education IS NOT a right, anymore than my A in the classroom is a right.
Subsidies allow more people to go to college, which would correspond to an increase in demand, and higher prices. However, I am claiming this is more efficient because the market does not take into account the gains from having a well educated populace.
 

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Subsidies allow more people to go to college, which would correspond to an increase in demand, and higher prices. However, I am claiming this is more efficient because the market does not take into account the gains from having a well educated populace.
That is so silly. The market knows better than any bureaucratic committee on how to determine the worth, or value, of a degree. That is why you have essentially useful degrees which will guarantee you a job anywhere, and essentially uselss degrees which will guarantee you nothing. Are you just upset that no employer wishes to hire you with your B.A. in sociology?
 

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That is so silly. The market knows better than any bureaucratic committee on how to determine the worth, or value, of a degree. That is why you have essentially useful degrees which will guarantee you a job anywhere, and essentially uselss degrees which will guarantee you nothing. Are you just upset that no employer wishes to hire you with your B.A. in sociology?
Answer this question,

Does the market price reflect things outside the marginal costs and marginal benefits of the individuals involved?

Would the benefits of a well educated work force be included into this price?

I am a civil engineering major by the way. I also work for a corporation, and we often collaborate with local, state, and the federal government. Strangley enough, its never for any of the reasons you say...
 
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Mensch

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Answer this question,

Does the market price reflect things outside the marginal costs and marginal benefits of the individuals involved?

Would the benefits of a well educated work force be included into this price?

I am a civil engineering major by the way. I also work for a corporation, and we often collaborate with local, state, and the federal government. Strangley enough, its never for any of the reasons you say...
What sort of "things" would you like the market price to reflect? And tell me, through historical evidence, how the government gained a more efficient pricing system that could reveal such "things?"

And your occupation proves my point. The corporation needed that specific academic background. You obviously could not obtain the job with a different degree, and that is how the market pricing system (in this case, the price to pay your wages) negotiates a fair salary based on the extent of the educational background.
 

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What sort of "things" would you like the market price to reflect? And tell me, through historical evidence, how the government gained a more efficient pricing system that could reveal such "things?"

And your occupation proves my point. The corporation needed that specific academic background. You obviously could not obtain the job with a different degree, and that is how the market pricing system (in this case, the price to pay your wages) negotiates a fair salary based on the extent of the educational background.
Yes, it negotiates a fair market price for my wages. The educational system is a fair price for my education. But an educated work force has benefits that extend beyond me, and this is not included in the market price, hence why a market in the absense of subsidies (in this case) will produce less education than is optimal. This is why subsidies in the correct place make the market more efficient.

You have a decent point when you say the government cannot as in your words "reveal" the most efficient market price. It is true that economists can and most likely will disagree at what they think this would be. I wouild hope though that if you accept this you at least are accepting that the market in areas with externalities is producing a deadweight loss (inefficient).
 

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Yes, it negotiates a fair market price for my wages. The educational system is a fair price for my education. But an educated work force has benefits that extend beyond me, and this is not included in the market price, hence why a market in the absense of subsidies (in this case) will produce less education than is optimal. This is why subsidies in the correct place make the market more efficient.
You're assuming that increased subsidies lead to a more educated work force. In fact, as the video posted earlier in this thread demonstrates, past a certain point increased subsidization has the opposite effect. Part of the issue, also, is that there are different types of education, and all subsidies are not distributed equally (or "most efficiently") in the first place-- this creates huge inefficiency and waste. Certain jobs, for example, really require a very low amount of "formal" education and very little trade skill, others require high skill and little formal education, and others require no skill and much education, etc etc. Taking the current state of affairs in our country into consideration, where bachelor's degrees are much more prevalent than ever before, more and more people with more formal education are forced to take jobs that never required degrees before-- this is money wasted to educate them and also leads to a bias against those who actually never attained a degree who normally would have done just fine (or better) in the job being rejected them. More degrees/subsidies simply degrades the value of the degree, as they are now given to people who are sub-standard in comparison to 50 years ago. Subsidies are, in large part, to be blaimed for this.

That being said, what exactly do you mean by "a market in the absense of subsidies (in this case) will produce less education than is optimal"? Aside from the fact that I don't know exactly what formula is properly (or "optimally") used to equate amount of education with the price of a finished product or service (and who should decide such things?), I would say that subsidies actually only mean that more people get degrees but are actually less educated overall.

You have a decent point when you say the government cannot as in your words "reveal" the most efficient market price. It is true that economists can and most likely will disagree at what they think this would be. I wouild hope though that if you accept this you at least are accepting that the market in areas with externalities is producing a deadweight loss (inefficient).
The key then being to minimize inefficiency, what substantial proof is there that all these subsidies actually do what they are supposed to do (or what the public is led to believe they do)?
 
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Mensch

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Yes, it negotiates a fair market price for my wages. The educational system is a fair price for my education. But an educated work force has benefits that extend beyond me, and this is not included in the market price, hence why a market in the absense of subsidies (in this case) will produce less education than is optimal. This is why subsidies in the correct place make the market more efficient.

You have a decent point when you say the government cannot as in your words "reveal" the most efficient market price. It is true that economists can and most likely will disagree at what they think this would be. I wouild hope though that if you accept this you at least are accepting that the market in areas with externalities is producing a deadweight loss (inefficient).
There are different sorts of education. Throughout political and academia circles, it is the college B.A. that so many believe should be a staple degree for all American citizens. That will, in turn, make us all more educated, less ignorant, and ever more ready to face the challenges of daily life. But what are these "benefits" you speak of that the market is not able to determine but that governments, through subsidized policies, are able to determine? If there were no subsidies to education, students would be forced to pay for their own education, which forces them to give more consideratio into the type of school and type of program that they wish to train in. Pushing everyone to get a B.A. in at least some sort of sociological topic is just an attempt by a segment of society to instill their politically correct values on everyone. In truth, when you're looking at a 50% FAILURE rate among students in public schools, a 6 YEAR AVERAGE GRADUATION RATE for the same sample of students, and a changing Pell Grant system that will make it an entitlement akin to Medicare and Social Security,there's something wrong with how we view education. If students decide that they don't want to go to a 4-year college and they'd rather be trained at some sort of vocational school, they should not be discouraged. Unfortunately, in our society today, vocational schooling receives far more discouragement versus the "prestigious" four-year degree. Prestige that has been seriously devalued after politicians and special interests decided everyone should have a worthless degree.
 
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