Free Markets - A Pipe Dream
Day 258, 12:27
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Published in United Kingdom 
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by
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by Tim09
Free Markets - A Pipe Dream
Note that before you read this article, I reccommend you take a look at my [a url=http://www.erepublik.com/article-447291.html]previous article[/a], as many topics are followed on from there.
Recently in eUK there has been a lot of discussion over proposals to place limitations on which companies can and cannot receive governmental support.
The main criticism of which is the detraction from 'Free-Market' principles, that many users on here hold as the 'perfect' form of economy.
What is the Free Market?
The Free Market principle dictates running a strictly laissez-faire (or "let do") approach to the economy, with the Government not regulating, taxing or running anything.
Supporters of a free market do not care about the distribution of wealth resulting from the system, instead prefer to view money as a 'vote' from the consumer to promote the product, and the company from which it is bought.
Advocates of the Free Market see it as being 'Morally Superior' to other forms of economy, as it allows an intrinsic freedom for both producer and consumer.
Now, take a deep breath and sit down for a second.
What I'm about to say might shock you.
The Free Market does not work as intended on eRepublik.
Why not?
+ The Free Market revolves around the laws of supply and demand.
Meaning that if there is not enough supply and a demand for a product, more of it will be produced naturally. This isn't exactly the case on eRepublik, at least not in a reasonable timescale.
The investment to start a company is substantial, and many users simply do not have the capital to start, not to mention that Q1 companies in most industries are not profitable at all. This eventually leads to a shortage of highly skilled workers that are needed in those industries to produce the higher quality, demanded goods. A prime example of this is the Housing sector.
If an economy is left in 'Free Market' mode for too long, then it wil end up producing only a sufficient supply of goods in industries where Q1 is sustainable. This is a flaw in the game, but nonetheless one you need to be aware of.
+ The Free Market works on the principle that there are NO regulations.
You might think this isn't a problem, but naturally one corporation will end up controlling the entire economy of one country.
This may well lead to a monopoly on goods, and an exploitation of the workers.
This is because the Free Market essentially allows only the rich to get richer. The lack of controls on the economy allow richer GM's and corporations to dictate prices, wages and competition by simply 'outlasting' others.
A prime example of this is the 'Inflationary Spiral' that occurs when two companies compete over new workers, as only the company with the most captial will win.
(This is documented in full in my previous [a url=http://www.erepublik.com/article-447291.html]here[/a].)
+ On eRepublik, there is no such thing as a 'better' or 'preferred' product.
All companies that produce Q1 food, produce exactly the same Q1 food. It looks the same, is bought in the same place and provides exactly the same amount of benefit. The only selling point that companies have is price.
Ask yourself this, would you start up a company to produce exactly the same Baked Beans as an existing competitor, to be sold in exactly the same store, to exactly the same people? If the answer is no, then congratulations! You are not insane.
Yet this practice is still common on eRepublik, where the Free Market allows this to happen despite there being absolutely NO consumer benefit.
+ Market Failure.
The most commonly cited problem with the Free Market, is it's fragility. Due to the lack of Government intervention as well, once the Market starts to fail there is no stopping it.
This is especially apparent in my earlier example of 'Unprofitable Industries at Q1', where there is no demand for a low Q product. Weapons, Housing and Hospitals which are all essential to a countries wartime potential, are all subject to this. Unless there happens to be some control over which industry new workers enter, they will simply enter the most profitable, leading to a shortage of essential goods and possible overpricing of the remaining goods, followed by an unsustainable number of workers in an industry such as Food or Gifts.
In closing
I have nothing in particular against the Free Market in the real world, only a number of people seem adament that a totally Free Market can work on here, and that any movement away from it is a step backwards.
Hopefully this article will show another side to that argument in particular, and that even advocates of the Free Market can see that there is much more to gain in an economy with controls.
Useful links:
[a url=http://wiki.erepublik.com/index.php/Economy]Erepublik Wiki on Economy[/a]
This article was brought to you by Inter-Pol.
Written by [a url=http://www.erepublik.com/profile-45161.html]Ip Lockard[/a]
Thanks for reading.
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Note that before you read this article, I reccommend you take a look at my [a url=http://www.erepublik.com/article-447291.html]previous article[/a], as many topics are followed on from there.
Recently in eUK there has been a lot of discussion over proposals to place limitations on which companies can and cannot receive governmental support.
The main criticism of which is the detraction from 'Free-Market' principles, that many users on here hold as the 'perfect' form of economy.
What is the Free Market?
The Free Market principle dictates running a strictly laissez-faire (or "let do") approach to the economy, with the Government not regulating, taxing or running anything.
Supporters of a free market do not care about the distribution of wealth resulting from the system, instead prefer to view money as a 'vote' from the consumer to promote the product, and the company from which it is bought.
Advocates of the Free Market see it as being 'Morally Superior' to other forms of economy, as it allows an intrinsic freedom for both producer and consumer.
Now, take a deep breath and sit down for a second.
What I'm about to say might shock you.
The Free Market does not work as intended on eRepublik.
Why not?
+ The Free Market revolves around the laws of supply and demand.
Meaning that if there is not enough supply and a demand for a product, more of it will be produced naturally. This isn't exactly the case on eRepublik, at least not in a reasonable timescale.
The investment to start a company is substantial, and many users simply do not have the capital to start, not to mention that Q1 companies in most industries are not profitable at all. This eventually leads to a shortage of highly skilled workers that are needed in those industries to produce the higher quality, demanded goods. A prime example of this is the Housing sector.
If an economy is left in 'Free Market' mode for too long, then it wil end up producing only a sufficient supply of goods in industries where Q1 is sustainable. This is a flaw in the game, but nonetheless one you need to be aware of.
+ The Free Market works on the principle that there are NO regulations.
You might think this isn't a problem, but naturally one corporation will end up controlling the entire economy of one country.
This may well lead to a monopoly on goods, and an exploitation of the workers.
This is because the Free Market essentially allows only the rich to get richer. The lack of controls on the economy allow richer GM's and corporations to dictate prices, wages and competition by simply 'outlasting' others.
A prime example of this is the 'Inflationary Spiral' that occurs when two companies compete over new workers, as only the company with the most captial will win.
(This is documented in full in my previous [a url=http://www.erepublik.com/article-447291.html]here[/a].)
+ On eRepublik, there is no such thing as a 'better' or 'preferred' product.
All companies that produce Q1 food, produce exactly the same Q1 food. It looks the same, is bought in the same place and provides exactly the same amount of benefit. The only selling point that companies have is price.
Ask yourself this, would you start up a company to produce exactly the same Baked Beans as an existing competitor, to be sold in exactly the same store, to exactly the same people? If the answer is no, then congratulations! You are not insane.
Yet this practice is still common on eRepublik, where the Free Market allows this to happen despite there being absolutely NO consumer benefit.
+ Market Failure.
The most commonly cited problem with the Free Market, is it's fragility. Due to the lack of Government intervention as well, once the Market starts to fail there is no stopping it.
This is especially apparent in my earlier example of 'Unprofitable Industries at Q1', where there is no demand for a low Q product. Weapons, Housing and Hospitals which are all essential to a countries wartime potential, are all subject to this. Unless there happens to be some control over which industry new workers enter, they will simply enter the most profitable, leading to a shortage of essential goods and possible overpricing of the remaining goods, followed by an unsustainable number of workers in an industry such as Food or Gifts.
In closing
I have nothing in particular against the Free Market in the real world, only a number of people seem adament that a totally Free Market can work on here, and that any movement away from it is a step backwards.
Hopefully this article will show another side to that argument in particular, and that even advocates of the Free Market can see that there is much more to gain in an economy with controls.
Useful links:
[a url=http://wiki.erepublik.com/index.php/Economy]Erepublik Wiki on Economy[/a]
This article was brought to you by Inter-Pol.
Written by [a url=http://www.erepublik.com/profile-45161.html]Ip Lockard[/a]
Thanks for reading.
-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-= -=-=-=-=-=-=-=-=-=-=-=-
+ Inter-Pol likes +
- http://www.xperteleven.com/?lid=164791 - Erep. Football League
- [a url=http://multisnake.com/]MultiSnake[/a]
- [a url=http://www.myerepublik.com/]My Erepublik[/a]
- [a url=http://wiki.erepublik.com/index.php/Main_Page]Erepublik Wiki[/a]
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Argh. I could write an entire article rebuffing most of this. Its not \"free\" by definition simply because of the one aspect the Government does control: It\'s monetary supply.
So you\'d agree that a free market approach is completely unfaesible on here?
No, I think a free market approach is doable, considering the Government regulating currency is a different beast. A business\'s ability to create capital is directly dependant on the value of the currency they hold (which you know), which then creates more opportunity.
For example, say that the GBP was worth something closer to 35-40 GBP to Gold, you could export excess to France/Italy/Mexico, and make money there without having to \"tell people where they can and can\'t work\".
You have several incorrect premises regarding what a free market is, and how it behaves.
Firstly \"free market\" is not necessarily equated with laissez-faire capitalism. This is a straw man and renders most of your argument invalid. In fact, in order for markets to work correctly, all of the participants need to have equal access to information. This is why activities such as insider trading are illegal; insider trading creates an asymmetry of information which screws people over.
Your premise that monopolies would naturally occur under a free market, and that under a free market \"the rich just get richer\" are also false. If you take a look at any real country with a free market economic system you\'ll see that poor people get richer, and rich people lose their fortunes ALL THE TIME. If you look at the real United States, which is a free market economy, poor people have been steadily getting richer.
Your example about there being no preferred product on eRepublik is flawed as well. There are all sorts of real world companies that produce products that are indistiguishable from their competetor\'s products. You may have heard of these products, they\'re called \"commodities.\" You know, things like oil. And whaddayaknow, they\'re all sold on the same market to the same people too! It\'s called the COMMODITIES MARKET!
You also don\'t have a clear understanding of what market failure is, and how it works, since your implied solution is state control of where people go to work. Such wonderful ideas worked really great in places like Soviet Russia with great success.
While your conclusion may be true that free market economics may not work on eRepublik (I am new and have not completed my analysis of the game mechanics) , your argument for that conclusion is invalid.
I could have elaborated some of my points in further detail, but I\'m pressed for time. If you wish me to elaborate on anything feel free to send me a message.
\"Firstly \"free market\" is not necessarily equated with laissez-faire capitalism.\"
Incorrect, Free market REQUIRES laissez-faire capitalism, lest it not be free.
\"If you look at the real United States, which is a free market economy, poor people have been steadily getting richer.\"
LOL I\'ll just quote this and leave it as my point.
\"You also don\'t have a clear understanding of what market failure is, and how it works\"
Erm, I\'m guessing that the definition \'Where the allocation of goods is inefficient due to individuals pursuit of self-interest\' never passed you by?
Because there are so few actual products on here, it\'s VERY EASY for things to become inbalanced.
I really need to disclaimer my articles with \"People who equate eRep economics to Real world experiences need to be shot\"
YOU CANNOT RELATE RL EVENTS TO EREPUBLIK. YOU CAN ONLY ATTEMPT TO APPLY PRINCIPLES.
So stop talking about Soviet Russia, the USA etc. and start using examples from here.
It wasn\'t my point to relate RL to eRepublik. I make no claim as to whether or not a free market type economic system is possible or desirable on eRepublik. It was however, my point to show that the argument is invalid because it uses an erroneous definition of what a free market is and incorrectly assumes what takes place under a free market in real life.
In other words, the conclusion of the article MIGHT be correct, or it MIGHT NOT be. But the conclusion doesn\'t follow from the premises because the premises are false.
I\'m crazy or Jack just said in his last comment that he doesn\'t have any idea if your article is right?
He also said this:
\"If you take a look at any real country\"
an😛
\"and incorrectly assumes what takes place under a free market in real life.\"
Does it matter how is free market IRL?
In eRepublik we need a balance between free market(we need some freedom) and controled economy.
Exactly as we do here.
@Bremer: I do not know if the CONCLUSION of the article is correct. I know that the ARGUMENT upon which that conclusion is based is wrong, because it hinges on an incorrect definition of what a free market is, and flawed assumptions about what markets do. Consider the following simplistic argument:
Paris is in England
England is in France
Therefore, Paris is in France
The conclusion, that Paris is in France, is correct. The way in which it was arrived at is wrong, because Paris is not in England and England is not in France. I am saying that the argument made in this article is wrong the same way my over-simplified example argument about Paris being in France is wrong, the only difference being that I do not know enough about how the game works to know what the best strategy really is yet, so I cannot make a claim as to whether or not free market economics works here or not.
Also, I only brought up real life in my response because the argument made within the article hinges upon incorrect assertions of what takes place in real markets.
Jack -
Can we see some citation as to HOW it\'s incorrect then?
Because all I can see so far is \'you\'re wrong\' and a couple of unrelated RL references.
\"the article hinges upon incorrect assertions of what takes place in real markets\"
The economics textbook I have in front of me disagrees with you.
I love a good debate.