PeterH, I don't disagree with everything you put forward albeit looking at things from a differnt perspective. Economics is man-made, it is based on models which are designed by men. In that sense there is some 'natural' element but the indisputable natural factors such as finite resources or potential environmental damage are not always considered over other forces (pressure of profit, shareholders etc) which may have greater emphasis.

A common ownership may reverse those risks of doing 'more of the same' damage when the interests and decisions are not limited to a small powerful elite. Ignorance of lack of care regarding some of those natural consequences may result in irreversible consequences. You would think our survival instinct would counteract some of those risks but sometimes human beings get lost in short term gain over long term consequences.

The idea that the existence of profit self-evidently proves the misallocation of scarce resources comes from Marx’s theory and is based on the labour theory of value (LTV), which we have seen is wrong.

It is a universally valid proposition of economics that human action always involves preferring A to B. Even to deny it one must prefer one state to another, and thus prove it by one’s action.

And we know from being human that the human actor, in taking action, is trying to use means to achieve an end, is trying to cause an effect, that he subjectively judges will be more satisfactory, or less unsatisfactory.

By preferring A to B he demonstrates that he places a higher value on A than on all the other ends he could have attained with the same scarce resources.

Not only is it untrue that the fact of profit shows that scarce resources are being misallocated, as Marx wrongly claimed, but it is demonstrably true that the fact of profit shows a better alternative both from the human and the environmental point of view, other things being equal.

By other things being equal I mean, there are people today who say that humanity is a cancer and plague. They openly wish that billions of people were dead. (They never seem to include their own miserable lives in their severe proscriptions). This view is obviously anti-human and I denounce it.

Marx claimed, and the ‘centre-left’ and 'centre-right', the part-socialists, claim that the purpose is, as best we know how, to make things better rather than worse for human beings in general including the poorest, and at the same time to conserve the environment. Assuming the question is as to the means to achieve that end, still a system based on private ownership of the means of production is better at allocating scarce resources to their most urgent or important uses than one based on compulsory public ownership, i.e. political socialism in full *or part*.

Channeling Marx, the socialists’ mistake is that the value of a good is *in* the thing itself. It isn’t. A good is only a good so far as man values it as a good, to satisfy an end that he is aiming at. That’s why the value of all the gold in other galaxies is zero. That’s why the value you place on water is higher when you’re thirsty. The value isn’t *in* the water itself. It’s in the human valuation.

The reason we value the environment is because it is important and beautiful, and not to deprive future generations of the pleasures we enjoy. But that doesn’t mean the value is objective. It’s still in the human valuation of what is good. You can’t figure out how to allocate scarce resources to their most important values, without consulting human values.

Profit and loss have important social functions.

Profit results from combining the factors of production so that the value of the final product later in time is greater than the value of the factors of production earlier in time. This means that the entrepreneur has removed the difference between where and how the factors are, and where and how the masses want them to be. Profit is the means by which the masses direct production, so that scarce resources are allocated to what the masses judge to be the most important and urgent ends. The greater the maladjustment removed, the greater the profit.

Loss results from combining the factors of production so that the value of the end product is less than the value of the factors of production. In other words the masses of people, as consumers, are saying to the entrepreneur “We much preferred the other things that could have been done with the factors of production. You wasted them.

Being able to use scarce factors profitably is actually quite rare. Most people can’t do it. 80% of business go broke in the first year, and of the remainder, 80% go broke in the next five years.

Now the scarcity of roads is not caused by the road-makers. The scarcity of bread is not caused by the bakers. And capitalists are not the cause of the scarcity for which they are often blamed. More than anyone else, they alleviate it. But when they employ people or provide goods they are vilified as ruthless exploiters.

As for the environment:
“The Swedish retail giant IKEA announced Thursday it will invest $4.6-million to install 3,790 solar panels on three Toronto area stores, giving IKEA the electric-power-producing capacity of 960,000 kilowatt hours (kWh) per year. According to IKEA, that's enough electricity to power 100 homes. Amazing development. Even more amazing is the economics of this project. Under the Ontario government's feed-intariff solar power scheme, IKEA will receive 71.3¢ for each kilowatt of power produced, which works out to about $6,800 a year for each of the 100 hypothetical homes. Since the average Toronto home currently pays about $1,200 for the same quantity of electricity, that implies that IKEA is being overpaid by $5,400 per home equivalent.”

Governmental direction of production is not less wasteful, better for the environment, less short-sighted, more caring, or better for the poor people, than production based on profit and loss.

Under full or part socialism, *all* the same problems of scarcity of economic and environmental goods will still exist, but there will be *no* way to calculate or allocate the scarce factors of production to their most urgent or important uses on the basis of a lowest common denominator of value. There will be no greater sightedness. There will be *much greater* waste of *both* human and environmental values than a system based on profit and loss.

See “Profit and Loss” by Ludwig von Mises: http://mises.org/daily/2321

PH, interesting figures about the Ikea investment. It seems like
we have similar rorts happening here. Lots of small time
entrepreneurs are moving into the solar panel installation business.

The Govt pays for a large proportion of the cost, various electrcity
companies are then forced to buy the electricity produced from
people, at 3-5 times the going rate. IIRC its around 60cKwH in
NSW.

Smart consumers will soon figure out that its far better to do
the washing at night, using power they can buy off the grid for
20c, then let the grid buy back their solar power for 60c, during
the day.

Who is going to pay for this? Other electricity users of course,
in the form of increased electricity charges. No doubt it will
be blamed on "greedy corporations", when it's in fact a political
decision made by the polticians that they elected.

What asinine comments in the main. No I don't work for the ANU. Yes I used to work for the ATO. So what? I ran international tax reform in the Office. How does that 'explain it all really?'. As to those who doubt my grasp on reality - oh well, all good stalinists question the sanity of those they disagree with or cannot understand. It's the logic of the gulag.

Just because a ruling elite calls itself communist doesn't make it so. You need to look at the class forces involveed. Why the ALP calls itself a Labor Party, the main part of the Opposition calls itself a Liberal Party, the North Korean dictatorship calls itself a Workers Party. That doesn't make it so.

Why are these issues improtant? Because when workers rise again - Bolivia in 2005 is the most recent example before Morales sidetracked them - there will be some of us who understand the logic of this and its operation in Australia and across the world. Hungary in 1956, France 1968, Portugal in 74, Iran 78/79 with the shoras, Poland until 1989, all show the potentality of the working class to challenge the dictators who run our day to day lives, and the potential to create a new society of plenty, where want is a foreign word and democracy rules in all aspects of life.

And of course the ongoing GFC around the globe will play its way out as decaying capitalism looks for solutions to restore stagnating or falling profit levels - exploit workers more through a longer working day and reduced wages for example, if we let them, and devalorise significant elements of capital if it can.