[Socialists] Questions on supply and scarcity

Some background: lately I've been economically moving towards libsoc/libcom and identifying with decentralized economic strategies that favor abolishing money (and even in some cases things like labor vouchers). I've been moving through these ideas a lot and exploring how a system like this might work.

You should study cases when the price mechanism fails in a market environment. There are often perverse incentives outside of the government, that can cause market failure. Let's take water for example. Market fundamentalists will often invoke the natural disaster scenario to big up the price mechanism and how it can help solve it.
So water is scarce, price goes up, which causes people to conserve it and encourages more market players to bring water from other states in order to make money. This is obviously a simple example meant to demonstrate a basic principle of a market system, and most economists will not hesitate to say that a real situation similar to this, will have massive problems with a reliance on a purely market system with no gov. oversight.
What are some of these problems? Well a decentralized system is better at determining prices over a long term basis. Natural disaster are temporary. That means that sellers are unlikely to instantly find the "correct" price (most efficient pricing). Quite the contrary, seeing as how elasticity of a scarce good is low and the producers know that, they could set prices unreasonably high or worse, simply hoard the water until it becomes more scarce in order to maximize their profits on initial inventory.
This isn't necessarily a "problem" depending on what the economic goal is. If our goal is to keep food prices cheap and stable, then a centralized system can be very useful for providing subsidies and directing the agriculture to industry towards making certain things.
To keep things short, whether an economic system should be centralized or decentralized is really a false dichotomy. It all depends on what our goals are. Different sectors will need different laws and different levels of government involvement.
Actually, the benefit of a price system is that it is immediately adaptable at all times between any two parties. An exchange is made if both parties agree on the value gained/exchanged, thus it is the "correct" price. Supply and demand is the obvious one, but time preference of money is also key, and what makes it a viable system even in emergency situations.
Contrast this with an alternative system, either workers setting prices democratically, or some governmental body making adjustments or emergency declarations. They are likely to be slow and/or likely missing information.
Can you provide a goal where centralized is better?
This should be good. I got the popcorn ready.
Hopefully you didn't have to wait in the popcorn line too long.
Popcorn sounds good and thus I'm entitled to yours. Hand it over.
I don't have much to add, but I think a good real life example to reference is the Oil&Gas industry. Specifically, the scarcity,price, and supply of crude oil.
Labor costs to produce Oil is relatively sticky, and the price of crude is directly based off of the speculation of total supply. In our current system, the price of the product is volatile, and the workers that produce that product only go to work when it is profitable (or assumed profitable) for them to do so. When producing a commodity, the workers get the benefit of getting paid whether or not their commodity is profitable at the time their production goes to market. Scarcity will cause the market price to increase, not because of worker's wages, but because of static demand interacting with less available product.
It's not clear:
The criticism which you can't seem to address is actually destroyed by the very premises of those who would levy such a criticism. Namely, they can't tell you what uses are wasteful, nor can they tell you how someone values $100 compared to water (regardless of what they intend to use it for) because they may have extreme surplus of one and not the other.
The only place in which this makes any sense is in the land of poor people, e.g. where both money and water would be scarce, in which case, all that is really being said here is "in times of scarcity, poor people's wants/desires are less important than rich people's." Not because there's some magic abstract utility in which we can compare their needs/wants directly, but simply because they don't have the means to "waste."
If people are not getting enough water to drink (as in, given some period of shortage of X length, at some point along X they will die of thirst) then wasteful usage would be one person taking more water than they need to last through X.
In other words, if I take 100L of water but I know I probably only need 10L, that leaves 9 people without water that otherwise would have had it. Price does not enforce this but it does create some amount of self-rationing. Granted, you might question "what about someone who has a million dollars and can just buy all the water?" and you'd be right: I'm not defending the allocations or distributions that capital or markets make, but rather asking for ideas on how a socialist society that has eliminated commodification of products might handle a situation where some form of rationing is needed.
My point was, pricing/profits tend to push this rationing to the individual level by makign the resource cost more personally. How does a more collective approach handle this, and how does it do so without some strong authoritarian measure?
Right, because all uses are subjective. That makes sense. I guess my objective would be to keep the maximum number of people from dying of thirst in this scenario.
I mean the pithy answer I like for these sorts of situations is "money implies property". Water is a human right, it doesn't matter what the cost of it is, resources need to be used to provide it to provide for human life.
So say the infrastructure is destroyed (as you posited in another thread), resources will need to be mobilized. Whether emergency filtration systems, getting water from neighbors, or other option.
Only in a world with money can the price for a substance required to live become 100$.
But I do see the point you are trying to make I think. The water example was of a resource that is easy to obtain labor wise and should be cheap but may become expensive due to circumstances. And that labor pricing doesn't reflect scarcity.
Well I reject the point in general. If a resource was scarce but easy to obtain then labor could be deployed to make it less scarce. Rare Earth metals for example are relatively cheap labor wise to obtain, but more expensive to find. Then there are asteroids we could go get, a very expensive in labor way to obtain the resources. As well as recycling. I also object to the original example, water treatment, water ecological management, sewage and utility maintenance, all of these things require quite a bit of labor, I think in many cases the price of water is sufficiently subsidized to make it appear cheap in labor when it probably requires quite a bit more than the price would otherwise reflect.
I also reject labor-as-value as being the best solution. Prices imply a form of money, and that means there are people who have it an people who don't. Not to say I am opposed to things like basic incomes, resource taxes, and so on (I actually prefer markets to price things if we are going to have prices). But resource allowances rub me the wrong way, which is what follows from going down the labor-as-value path.
The system I would instead prefer is socialism as gift economy and collective bargaining, that might be a bit of a pipe dream at the moment though (a lot of this is predicated off of an automated future). Both of which encourage/require the sharing of resources. In which case the scarcity of a resource is managed by the people who spend their time collecting it; with the common work around for something you specifically need (and that they won't gift to you) to be going and working to collect it in the quantities you need. And the general idea that if one is collecting water, the purpose of it is to give everyone water to drink.
I think between your answer and the others here basically saying "ok, mobilize infrastructure to provide water to people who don't have it" I'm pretty happy. Maybe rationing isn't an inherent economic mechanism in a socialist mode of production like it is in capitalism, but if I'm a millionaire then the rationing doesn't apply to me anyway, and since profit distributes randomly and unevenly, then capitalism's rationing mechanism is meaningless and only serves those who control some resource.
For some reason, I have the same reaction. Maybe not even personally, but perhaps with how I assume they will be perceived collectively. Really, resource rations make sense though in a "here's how much we have, here's the rate of consumption, here's the rate of renewal...now, for each resource, match the consumption to its renewal, or acknowledge that within some time frame it will disappear entirely."
That said, I'm completely stuck between the idea of labor vouchers/labor pricing, some form of resource rationing, and a completely moneyless system. Labor vouchers make sense in a sort of "you get out exactly what you put in" way, resource allowances play to the RBE enthusiast in me that wants to treat everything as raw materials and basically make labor free, and completely moneyless is the ideal side in me clawing for some way to justify just letting people take what they "need."
I really am starting to think the Kropotkin "take what you need" and everyone who works is entitled to the social output, while a nice idea, is recipe for disasterous overconsumption. We really need some kind of highly-renewable resource that constitutes 90% of production or energy-to-matter Star Trekian replicator system for this to work.
But then I go to labor vouchers and it feels like a weirdly rigid version of money. I think if I trusted that money could be used in such a way that things are built for-use as opposed to built for exchange I might find it an acceptable medium, but as it is labor vouchers are the closest thing to money and prices that eliminate the kind of for-profit economic activity I personally think is kind of insane (or, at the very least, promotes insane behavior).
Then I go to "ok, make labor free like Kropotkin, but use resource allowances to limit consumption" and I imagine a scenario where I have 5 lumber tokens, 4 coal tokens, and 3 iron tokens but SHOOT the widget I want is 4 iron tokens so I have to wait another 5.723 days before I can buy it! It just feels fucking weird...although it does incentivize lowering resource usage, which is certainly favorable.
So I don't know. I can't really make my mind up.
A fully libertarian communist system would probably work on the principle “when there is enough, everyone can take as much as they desire. when there is scarcity, rationing will be used.” So in the case of a sudden water shortage, it’s likely that water would be rationed.
As for your statement about markets encouraging people to use less water, it’s somewhat true but there are a lot of problems with it.
For one, people have a baseline amount of water they need to drink to stay alive. Allowing predatory pricing could mean that some people literally die of thirst while others have more water than they need (this is actually what has happened irl). Water is a largely inelastic product, so even many capitalists would agree that markets wouldn’t work very well here.
Another problem arises when people have unequal amounts of money. Poor people are incentivized to waste less water, but the effect is significantly reduced or eliminated for rich people.
That said, some libertarian socialists do support markets (with the sellers being co-operatives instead of privately owned businesses). However, in the case of necessities they typically believe that rationing should be used if necessary.
I personally don’t see any reason to prefer market pricing over rationing in this specific scenario. Rationing means that everybody is incentivized to use less water but nobody should die of dehydration.
EDIT: And when I say rationing, I mean direct rationing. Not fixed prices, labor vouchers, etc.
I am starting to see the rationale behind this viewpoint. I liked the inherently automated aspect of self-rationing via rising prices (not that I advocate for markets/pricing), but it's becoming clear this isn't really an acceptable solution vs just a general ration.
Who will decide exactly what is rationed to whom, and how will they make this decision? How can we be sure they have sufficient and accurate information quickly enough? I severely doubt you will ever get a top-down system that can outperform a decentralized, organic one.
One thing that is under-represented in your story is that in a pricing/profit system, not only does increase in price serve as a type of rationing but it also serves as the incentive to innovate and explore new ways of increasing supply, efficiency of use, and substitution for different goods/processes.
Rationing seems to be the popular answer here but I have not seen anyone actually talk through the problem.
In the case of a community losing potable water for a short period of time rationing is fine, it even happens under capitalism all the time. This is the easy mode of the question; people need 1L/day to survive, let's ration 1L to each person.
But what about doctors and manual laborers fixing the problem and the countless other people who have physically and/or mentally demanding jobs that are vital? What if they need 1.5L/day to function? Pregnant people? Sick people?
The shorter the time frame the less of a problem it is but not everything is short term.
What about goods that are not directly consumable by end users? The so called intermediary goods?
If a major copper mine collapses and we lose 20% of copper production for months, possibly more than a year? How does one ration this? There is no X amount of copper each person needs. Which manufacturers get how much copper? Based on what? Are you accounting for the dynamic nature of an economy? Just because a businesses needed 10 tons of copper last year doesn't mean they don't need more (or less) now. How will this dynamic number be calculated?
How does this impact people and businesses down stream in production? Should we have 20% too few wires or 20% too few pipes? 10% too few of each? Why? Then who gets the wires and pipes?
If we lack prices there needs to be some way of rationally making these decisions. So "rationing" is a bit more complex than people are letting on.
This is an interesting reply and I'd also like to see responses to this. My immediate reaction is, maybe it makes sense to buffer common resources such that an immediate loss in supply can be weathered for some period of time. This could be done at both the company and community level, depending on local need.
But if you have a three month buffer and a six month shortage, what happens? Your point about someone who actually needs copper more (granted, need has to be subjective in a market system) makes sense: they are willing to pay more, so they get the copper.
Points about "how do they pay more?" are also valid, though. If they have a billion dollars, the price doubling doesn't keep them from finishing their 200ft all-copper statue of themself, where people's homes might not have power cables. Who's to decide what subjective need is more valuable to society?
The difference seems to be some mix of first-come-first-serve/determination by the producers of copper, and a system which jacks up the price such that only certain participants may bid (regardless of any idea of need).
In either system, if there are alternatives, if makes sense to use the alternatives (more supply or lower price), so we have to assume that there is only one copper mine, there are no others, and although some things can be made out of other materials, there are some essentials that cannot.
Honestly, I think in both systems, you'd see shortages for some period of time. People would have to delay their house rewiring and the billionaire might only get the legs of his statue built.
But you're right: rationing here is difficult and complex. Pricing has a mechanism to deal with this complexity, although I guess the question then is: what's more optimal? A conscious decision by the producers of some scarce resource about where that resource is allocated or an automated mechanism optimizing for personal gain? I'd be very interested to see the actual outcomes of the former and what kind of result it produces.
This sounds a lot like a problem I posed yesterday, I even used the same example and prices, did I make you start thinking about it? :)
Yes! You and a conversation with Phanes7 brought up the same point within a matter of hours and I wanted to get people's thoughts on it from the leftist camp.
It's a good, thought-provoking example. I'm not 100% happy with either the market solutions or the leftist solutions, but it has made me think about how distribution would work in various cases, which is something I hadn't modeled in my head before.
So thanks for posting your original comment.
The problem is with your assumption about the nature of a shortage: It's not necessarily a result of a lack of absolute availability. It can be a deliberate throttling of supply by a violent monopoly, in which case the pricing mechanism means absolutely nothing.
For price to be a reflection of anything meaningful, you must have a background of free democracy and relatively flat wealth curves. Anything else is indistinguishable from violent extortion.
Water is a human right, so you have to start with a guaranteed minimum. And there is nowhere on Earth in the 21st century where the guaranteed minimum water needs for human survival cannot be met unless someone is deliberately interfering. This is basic physics at work: The purely physical demands of water purification and delivery are trivial.
Beyond that, for other needs (household and industrial) you can have a pricing mechanism so long as the conditions mentioned earlier are met: A fair system of laws guaranteed by democratic governance establishing a genuine market rather than a private/feudal monopoly.
Which is where my hypothetical comes in: some critical infrastructure is destroyed and water availability becomes much lower than normal.
I am starting to follow the example a bit more, though: water goes up to $100/bottle, but that doesn't mean some person who makes $2M/year can't still just buy it all up. So pricing enforces some amount of distributed rationing, but not in a way that eliminates waste or distributes scarce resources where they are needed.
So really, the pricing system only allocates optimally if everyone involved has some meaningfully proportional share of wealth (as opposed to wildly disproportional).
I'm an ancap-minarchist and I wanna ask how do you define labor as it's highly subjective and is almost unusable to define the value of something as there are so many steps to doing something and it gets so complicated it's impossible to define value as the amount of labor taken to make it. (The labor theory of value has been challenged by many economists throughout history because of this) (I believe in Austrian economics and their theory of value)
I think the problem is I think in terms of costs, and capitalists think in terms of value.
For every Thing built, there is a resource cost and a labor cost. How much iron? How much coal? How much labor?
The value of something, say a widget, is different from the cost of the widget. The widget might have taken 20 hours of labor and 5g of iron. That's the cost. The value would be different for different people. The widget might be worth its cost if I need that widget for something, but if I don't need that widget, it has no value to me personally.
So subjective value still comes into play, but rather in my scenario, the cost of some Thing is the actual cost (as in, full cost of production along the entire supply chain) and the subjective value of it would be determined at the end of the chain, as opposed to at every step along the chain.
By issuing labor vouchers (non-circulating money) as UBI (which you have to work for to get) according to the total amount of product is produced overall and distributing them according to need (mothers, children, elderly, the sick and disabled, large families, etc first).
Except this would literally be impossible because your UBI check would only by enough to fulfill your own needs and not to buy up all the water that's available. That literally wouldn't even make any sense.
Well at least you're considerate
But what right do you have to abolish currency? Why not just convince people to do it voluntarily?
Rights are subjective. A better question would be what ability do I have to abolish currency, and the answer is personally very little.
Yes, why not? This is why I'm more aligned with libertarian socialism/communism than authoritarian variants of leftism.
The interesting thing here is the tacit admission that socialism can't allocate scarce resources. "Oh, government will have to allocate...". As I have always said, socialism is just a form of fascism. If your system can't do the one thing an economic system does, it isnt economics.
First, I don't see why a socialist mode of production couldn't allocate scarce resources, even without rationing. The question is moreso what do those allocations look like. Second, capitalism requires government guidance, so by your definition, capitalism is a form of fascism, and also isn't economics. Great job, your statement's binary extremism negated any meaning you were trying to convey.
Optimal for what? Cost cuttery?
Optimal for limiting use of a resource that is both absolutely necessary and also in much shorter supply than people are used to.
I think what is being butted up against is the perceived non-scarcity of some resource against the sudden scarcity of it. Prices take this into effect fairly rapidly and essentially act as a self-imposed ration.
Granted, that's not to say everyone will get the water they need to survive, so it's still not as optimal as some nebulous solution where the water is dvided evenly, but it's a somewhat automated response that has the effect of limiting use of some scarce resource.
Apply this logic to roads and see how much better they could be if run by free market economics. Owners could charge more for people to drive during peak traffic. Behaviors would change and I bet accidents would decrease. That’s just one possibility.
You view price as a one way interaction. That’s one of your problems.
Y’all abolish money people crack me up. Even in the most anarchist societies some form of money would naturally occur. Read a history book. For some reason people like you reject this as some product of government or some other ruling class order.
Saying abolish money is as rational as saying abolish gravity.
For real, money is just indirect barter. And if the goal is to eliminate barter in any form, good luck fighting the black markets.
First of all im a capitalist, and im just going to raise a question to you.
Will labour vouchers work just like money, or will you restrict the freedom of the people?
In the world of ever-growing complexity I've constructed in my head, if labor vouchers are used, they would be non-expiring, and would be exchangeable. The only real difference between them and money is that they would be destroyed once exchanged for products in the primary economy, which is a network of individuals who all choose to voluntarily participate.
I don't buy into expiring vouchers or limiting exchange of them. I get the idea behind not allowing them to be exchanged, but I think it would actually cause more waste because at worst it eliminates second-hand markets (like garage sales and whatnot) and at best it just forces barter or secondary currencies.
As far as expiring them, that's a crock of shit. How do I save for a big vacation if I can't accumulate some amount of resource allocation based on the work I've done? Does the value of my work disappear after some amount of time? No?? Then neither should the measure of my share of the social output...
You're overlooking the fact that citizens of a communist country will be better people than the miserable creatures fighting for survival under capitalism.
Temporary relocation to govt housing and the funding of rapid construction of water pipelines and desalinization plants.
This stuff isn't terribly difficult tbh, and in a more socialized system, we would have more controls in place to start off with any way to ensure that infrastructure is ready.
Disasters happen, but under capitalism, the response is always to let the poor die first e.g. prices just shooting up.
Disaster is always a means to seize wealth under capitalism.
You are so close to reality. So close.