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A Classical Sonata | |
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Robert Avila | 09/02/04 | ||||
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Q | 09/02/04 | ||||
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Lucius Foster | 09/02/04 | ||||
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Finster | 09/03/04 | ||||
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Q | 09/03/04 | ||||
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Finster | 09/03/04 | ||||
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Q | 09/03/04 | ||||
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Finster | 09/03/04 |
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Date: September 02, 2004 03:10 PM
Author: Robert Avila
Subject: A Classical Sonata
In times of turmoil, chaos and endemic insanity the Classic has always had a special appeal. The simple rational forms, the clarity of design and execution, the obvious intelligence rather than romantic passion that lay behind every move calms and focuses the troubled soul. With this thought in mind I suggest some consideration be given to David Ricardo and the factors of production so prized by classical economics: Land, Labour and Capital.
• LAND then, as now, was Location, Location, Location. The gifts of the earth be they Ukrainian top soil, Saudi oil fields, or a spectacular harbor at the mouth of the Hudson, was what it was all about; if you've got it flaunt it. The vast majority of the fortunes in the Forbes 400 are real estate based.
• LABOUR was of course the inevitable toiling masses yearning to get paid, the unwashed minions, serf, peasants, proletariat, illegal aliens, the specter haunting all gated communities.
• CAPITAL was the tricky one. Capital is the stuff that accumulates after subsistence wages are paid to the masses for toiling on the land. It generally consists of things like gold bullion, manor houses, railroads, industrial empires, Harvard law degrees, the music, book and lyrics for Guys and Dolls, the global money market.
In Classical economics the return, the share of the pie given to Land, Labour, or Capital was a function of how plentiful each was relative to the others. Marshal later marginalized it and twentieth century economists, suffering from physics envy, mathematized the whole mess to the point of total unintelligibility, but at its heart the one factor of the three that is in short supply gets the prize. Things can also get a bit muddy with Capital when it accumulates in Labour in the form of education, skills and social graces and when it accumulates in Land in the form of mines, infrastructure and amusement parks. However, the problems created by this muddiness are generally offset by the gained ability to talk in terms of environmental depreciation and the need to invest in our children.
So, given these Classical forms, what of relevance can we say about the post modern world?
1. The supply of skilled industrial and technical Labour available to the global market has increased dramatically with the opening up of the Chinese and Indian economies – the inspired virtues of Communism and Socialism could keep these clever workers in poverty for only so long. The globalization of these two formerly closed economies has begun the long and dreary process of driving down relative wage rates for production workers, computer programmers, consultants, doctors and bond traders world wide.
2. The supply of Capital, always a conceptually weak point in Classical models, has run head on into the information revolution. Although a significant amount of time devouring infrastructure creating Capital accumulation is still taking place, anyone tabulate hammerhead cranes in China can vouch for that, we have also been seeing significant increases in Capital productivity. Moore's Law, the internet, integrated supply chains, ERP, SAP, plug-and-play industrial enterprises, Cad/Cam assisted architects by the acre, everywhere you look Capital's bang for the buck appears to have increased dramatically and market rates of return are modest. Even at Capital's most abstract levels financial returns are historically low.
3. The supply of Land, as all of us other than the Dutch seem to know, is fixed. We have certainly increased agricultural productivity through the addition of Capital rather than Labour and achieved similar accomplishments with regard to resource recovery. However, geologists and commodity traders are beginning to make some interesting noises about diminishing returns. The proponents of the Hubbert Curve suggest that global oil production regardless of politics or technology is probably topping out. The environmentalists can bend your ear interminably about loss of top soil, fertilizer and pesticide accumulation, over fishing, ad nausea while anyone tracking the Economists Commodity index can't help but be impressed by the 35% price increases in Metals. All of this is taking place, remember, at the beginning of the great Asian consumer market boom. As Living standards in China and India seek those of South Korea, Taiwan, Japan, etc. Land and all it provides is the Classical factor of production most likely to be in short supply.
Near term of course Western residential real estate could still be over priced. Sorry for the long and turgid length but everyone is always asking me for investment advice …
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=182921)
Date: September 02, 2004 08:32 PM
Author: Q
Subject: Heh heh heh
Heh heh heh
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183009)
Date: September 02, 2004 09:35 PM
Author: Lucius Foster
Subject: The Real Estate Expert Speaks
Ignore my degrees and my lack of any great spelling ability. I am the expert of experts in one small area of investment and that is Real Estate in the Long Skinny State of California.
I have seen investments that can make millions for the investor who has the ability to wait two years for the biggy return.
I have seen investments where you can buy today and sell it tomorrow for half the price and still make money. Called rediscounting discount paper.
Here in LaLa town some REIT's are floundering as they attempt to apply Gringo East Coast applications in the management of multiple units. All they have to do is start collecting rents weekly and on occasion employ the tenants to fix and clean and work on the property at below minimum wages. It would be nice if they utilized managers who at least could speak Spanish. they do not require great ability, but just enough to get the dinero.
I have recently counsled a group of Japanese who bought a mass of hillside property only to find out that it was subject to Eminent Domain proceedings. There is a way out to recapture their investment and what is even more fun to develop the land.
Masses of ways to make large sums of money. But I am not alone, there are many others out here who can do the same. The problem is that the experts from other areas come here and assume that everything is similar. Not so. So they on occasion fall of the bike. I would help pick them up but they will not ask. Ah well. Frustrating
Cheers Lucius
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183025)
Date: September 03, 2004 09:35 AM
Author: Finster
Subject: Land And Population
I agree with the thrust of this observation, but you stopped just short of explaining why land is likely to be in short supply, and the answer to that question is extraordinarily important.
Of course, there is no shortage of land per se - there's just as much as there always was. What has changed? The number of people. The factor that is of interest is not the amount of land, but the ratio of the amount of land to the number of people. Call it, for example, L/P.
In the fraction L/P, the numerator is fixed. The denominator is not. The value of L/P decreases when P increases.
L/P is probably the single most overlooked and underestimated factor in human living standards in the entire field of economics. Now living standards are a multivariate function of other independent variables as well, such as technological progress and human liberty, but there is no escaping that the smaller L/P, the lower the standards of living. Because L is fixed, the higher the population, the lower the standards of living.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183155)
Date: September 03, 2004 11:13 AM
Author: Q
Subject: L/P
I would have to take a different point of view. I don't think it's the higher population at all. In fact, I think that filling up the land is a good thing, and could be very fulfilling for everyone.
I believe the issue is that we don't manage the land we have, and instead of doing that, we spoil it, thenm we covet someone elses piece of land. In fact, dominion of the land and it's resources is at the root cause for wars.
I also believe that the technology ceiling we've been bouncing off for decades (like refining expanding-gas technology) is due to our unwillingness to manage well what we already have.
While I understand and appreciate your views Finster, I also think you assume some things, one thing in particular: that the way we think will not change. Given the way people currently think, and based upon what poor stewards we are, then I would say you are correct. But if the way we exercise our stewardship of this planet were to change, everything would change - and I think we would also break through the technology base with a quantum leap into how this universe really works.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183197)
Date: September 03, 2004 01:14 PM
Author: Finster
Subject: High P, Low L/P
From this week's Mogambo Guru, "Doctor Dinero":
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183243)
Date: September 03, 2004 04:58 PM
Author: Q
Subject: Have you noticed
How much rain we have been getting in the US lately? Hmmmmmm. Could be a setup - for recovery? What do you think?
Should the United States feed the world?
Perhaps all this churning going on is making butter - and there is a river of oil about to break through the hard places. Time will tell - one step at a time.
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183351)
Date: September 03, 2004 06:41 PM
Author: Finster
Subject: May Be!
You're good with the questions, Q...
Finster
(http://65.88.90.51/forums/Index.cfm?CFApp=3&Message_ID=183376)