Normally I wouldn’t do this, on the grounds that it’s a breach of commenting etiquette. However I wanted to make the point publicly on LibCon.

Despite this being a site dedicated to liberal topics it has nothing on the front page about two massive liberal topics.

1. The fact that an EDM actually passed which effectively opposed British obligations under the European Convention on Human Rights. This accompanied by a media backlash against the ECHR and Human Rights legislation in general. Coming from both left and right.

2. Nothing on Egypt?

Instead we get articles on the cuts, (valid articles) and on Ed Milliband’s relationship with the TUC. Which while interesting, are in no way as core to the concept of ‘Liberalism’ as the above two issues.

Could someone explain this editorial decision.

Apologies for taking up space on your comments section.

You can’t blame them. They would like their party back from those that stole it from them. Like Oberster SA Fuhrer Clegg and his brown shirt mates.

Oh for a Mubarak moment in the UK. ConDem government looking very shaky…

http://haringeygreens.blogspot.com/2011/02/cracks-begin-to-appear-in-condem.html

3 – I wasn’t aware the UK was run as a military dictatorship.

@Ed

It’s because leftists- including those sailing under a false flag of “liberal”- see government as the bringer of all good things, because it redistributes money in their direction. Thus, democratic or populist opposition to autocratic power just leaves them chilled. They like to believe they are on the side of “the people”, but when there is successful resistance to undemocratic authority, as in your first example, or the genuinely populist rejection of it, as in the situation in Egypt, they realise that they do not care about the people at all as, deep down, every Progressive has a deep distrust of the will of the people, since they consider the people to be uneducated, foolish sheep who do not know what is best for them and need a wise, benign despotism to guide them.

It is entirely mistaken to believe that such people using the Americanised form of the word “liberal” are in fact liberal. They are the exact opposite. Both of your examples represent a direct threat to their ideal of governance. But they can’t come out and say that, or their cover is blown. So, they say nothing.

@1 Ed

I know what you mea, but if people aren’t writing articles about Egypt or the EU then they can’t get published – it’s not like there’s a set agenda (take a look through LC’s archives there’s loads of subjects covered there, even (entertainingly enough) a plea to vote UKIP*…) being followed or something sinister going on. Why not write one yourself? If I had the time/expertise I would. Also, events are moving so quickly in Egypt one has to be wary of passing any firm judgements on that issue – I personally think (much to our pal @5′s chagrin, no doubt) that the Egyptian movement is hugely beneficial for the Arab world as a whole but it remains to be seen what will fill the Mubarak-shaped hole now he’s exited, stage right. I mean I don’t think anyone on this site would particularly like another state like Iran to come into existence, for example, and a military leadership however temporary is always cause for lament.

*It was part of a series of articles from all sides of the political spectrum for the 2010 general election, and I believe the editor of this blog was on his hols when it got published…

On-topic: I agee with the OP

Ian @ 5

A number of things there. Of course Egypt’s regieme was feted by America and therefore by extension the British Government despite (or because of) being an odious dictatorship. The Right where quite happy to dance around and deal with Mubarack as long as he serves the West’s needs. When things started to fall apart, the West’s support started to crumble around his ears, pretty much like Saddam all those years ago.

If you ACTUALLY look at what this ‘revulotion’ is about, and what the central issues that concern the protestersit is not some kind of ‘Small State’ chant, it is the more mundane, Left Wing issues. They are complaining that food prices are too high and that wages are too low, in fact, the minimum wage is central to their aims. From what I have read and seen on TV, they are not attempting to herald in some Neo-Liberalism of the markets, it very much appears they want a President that looks after them better, not less. No-one is demanding that they are ruled by an oligargy, or by owners of wealth, they want the State to provide them with a better standard of living. Whether that is a realistic aim or not is hardly the point.

@4: “I wasn’t aware the UK was run as a military dictatorship”

In a judicial review, the judge has accused Gove, the education minister, of “abuse of power” in his decision to cancel the Building Schools for the Future (BSF) programme without consultation:
http://www.cypnow.co.uk/news/ByDiscipline/Education/1054461/Judge-accuses-Gove-abuse-power-BSF/

Judgement: http://www.bailii.org/ew/cases/EWHC/Admin/2011/217.html

@Jim 7

If I’d claimed the Egyptian people were fighting for some kind of libertarian minarchy, you might have a point. But I didn’t. I said they were revolting against autocratic and undemocratic government. They were demanding the right to choose their leaders and for those leaders to be accountable.

People on the progressive left, who are themselves constantly fighting to impose autocracy and gradually disempower democratic institutions should take note. The corporatist form of undemocratic government that goes by various names, such as the “technocratic managerialism” personified by forms of government like the EU and the generalised modifications to our local British democracy, is designed to deny the will of the people being expressed in our governance. As such, demands for democracy in faraway lands frighten such faux liberals. There is nothing a left wing activist fears more than popular democracy; under corporatism “representation” is on the corporatist structure in which some appointed spokesgroup decide what policies are followed, not popular vote- which so often get in the way of the grand plans of the oligarchy.

This is a great day for the Egyptian people. If they choose socialist representatives and policies, then I applaud their right to do so. It will mean they are far more free than we who increasingly labour under an oligarchy of appointed technocrats and judicial cliques.

Sue

I have long felt that the quality of LibCon articles could be judged by the lack of relevant responses. In this you have succeeded magnificently – the political equivalent of an Oscar.

You have received:

1. A (unusually respectful) bit of whataboutery from Ed. At least it isn’t about female genital mutilation in [insert random African country] irrespective of evidence. Ed please write a piece about 600 words on the pathetic, unpopular-populist posing that the Con/Lab have indulged in about votes for prisoners as an excuse for their common inability to even understand human rights; or law; or common sense; or the English language; or financial consequences.

Then send it to Sunny. He’s usually desperate at weekends. No more than a fifth may consist of obscenities. Yes, I know it’s less than they deserve.

2. An auto-comment from sallybot mentioning brownshirts. One of these days someone is going to program ‘her’ with the information that the SA were stabbed in the back by Hitler in 1934. Which might not stop ‘her’ comparing them to Clegg and co, but …

3 A completely irrelevant international comparison.

4 A ‘libertarian’ rant based on the belief that while any collective human endeavour must be inherently evil; however if big business is involved somehow everything becomes for the best in the best of all possible worlds.

5 Various more (S Pill, Jim) or less (Bob B – who’s usually more sensible) rational comments on the above.

While celebrating your complete ‘ignoral’ as a mark of your intellectual supremacy, I’d like to make a few comments of my own on the piece here.

You are among the very few Labour commentators who realised the extent of the public’s sincere, if guarded, welcome for the coalition. Voters welcomed the idea of cross-Party co-operation. In the nine months since the election, that welcome has been largely lost.

You correctly identify the oxymoron at the heart of the Conservative part of the coalition – the amorphous, undefined mess … [that is] too ideological and ill thought through. The ‘comical-tragical’ thing about modern Tories is that they believe their own propaganda.

Ministers such as Gove, Lansley, Pickles and Spelman have rushed ahead with reforms dictated by the rhetoric of US ‘small government’ libertarianism. Of course the US Right never intends to reduce the State, just to make more money out of it. So actually implementing the rhetoric not only reduces vital services, it also tends to end up costing more. A bad idea if you’re campaigning under a banner saying “We’ve got to spend less”.

Outside the Westminster bubble, a lot of the people who actually run things, have realised this by now. Hence the revolt by Lib Dem councillors you started the piece with. I suspect there have also been quieter, but equally fierce reactions from many of their Tory equivalents too.

I will leave your comments on how coalitions of disparate elements might work for another time (the experience of Northern Ireland is also relevant here). However these Tories have an ideological antipathy to the ‘State’ (until privatised) that clashes with the more pragmatic approach of most Lib Dems. It is clear is that this makes the coalition not workable and it may well unravel on matters of principle this year.

The ‘Orange Book’ Lib Dems are still very much a minority in their own Party, hardly existing outside the chattering classes. There were never very many of them and their numbers have been lessened by Cameron making the Conservatives more acceptable for those with liberal social views (now massively in the majority).

As a result what support Clegg has in his own Party is entirely based on what success he has. What was objectively a poor election result from him, followed by an increasing failure to deliver Lib Dem policies, may well break even the Lib Dem’s innate tendency to loyalty.

This means that the leisurely ‘lie back and wait till we’re swept into power in 2015′ attitude of too many Labour commentators won’t work (and if they are that worried about the cuts, shouldn’t they want this government over as quickly as possible). The opportunity for success or failure may be nearer than you think.

@Roger Mexico

A ‘libertarian’ rant based on the belief that while any collective human endeavour must be inherently evil; however if big business is involved somehow everything becomes for the best in the best of all possible worlds.

I said none of those things. I spoke in favour of freedom from tyranny and democracy. The progressive left, as I said, directly opposes those things and strives for a society which is neither free nor democratic. Do you prefer that “progressive” model also? How do you justify that?

@11: “The progressive left, as I said, directly opposes those things and strives for a society which is neither free nor democratic.”

That, of course, is undiluted nonsense – in Britain, it took from 1832 to 1928 for the voting franchise to be extended to include all registered citizens in residence.

Economists have long since recognised that unregulated markets don’t necessarily result in efficient outcomes in the sense that resources couldn’t be reallocated so as to make some better off without making others worse off. This was the professional consensus 50 years ago:

Francis Bator: The Anatomy of Market Failure
http://instruct1.cit.cornell.edu/courses/econ335/out/bator_qje.pdf

This recently published book on market failure has been well-reviewed in business media: John Cassidy: How Markets Fail – The Logic of Economic Calamities (Allen Lane, 2009)
http://www.businessweek.com/magazine/content/09_47/b4156079791251.htm

Try also this interview in the FT of Prof Carmen Reinhart on recurring patterns in 800 years of financial crises:
http://video.ft.com/v/82349517001/May-3-800-years-of-financial-crises

She is co-author of a book with Kenneth Rogoff: This Time Is Different – 8oo years of financial crises (Princeton UP, 2009)
http://www.economics.harvard.edu/files/faculty/51_This_Time_Is_Different.pdf

I think the last sentence of this post is the most telling. Do we in fact have a merger bewteen the two parties? I think for some like David Laws ort Nick Clegg this is an option – though not necessarily one that has yet been vocalised. For others like Simon Hughes it would be more problematic.

the coming moinths will be extremely painful for the Lib Dems. They will be lucky to survive.

Judging by Saturday’s news, Cameron will be relaunching his big idea, the Big Society, in a keynote speech on Monday amid growing fears in the Conservative Party that it has started to backfire on the Government.

As local authorities and voluntary groups feel the impact of the spending cuts, some ministers are worried that the Big Society will be seen by the public as an attempt to mask the cuts and hand state-financed services to private firms. .

Mr Cameron will explain how 5,000 trained community organisers will help his big idea take off in less well-off areas. The Government plans to invest £470m over the next four years and its Big Society Bank will have an initial budget of £200m.
http://www.independent.co.uk/news/uk/politics/cameron-to-declare-the-big-society-udoesu-exist-2212494.html

OTOH “As a former chancellor, [Kenneth Clarke] remains gloomy about the broader economic outlook, warning: ‘We’re in for a long haul to get back to normality.’ While he, as a ‘deficit hawk’, backs George Osborne’s strategy, he sends a stark warning. ‘I don’t think Middle England has quite taken on board the scale of the problem. That will emerge as the cuts start coming home.’”
http://www.telegraph.co.uk/news/uknews/8320026/Kenneth-Clarke-interview.html

From press comment on George Osborne’s emergency budget last June:

Budget 2010: ‘Pensioners are the biggest losers’ – Pensioners came out as one of its biggest losers in George Osborne’s emergency Budget.
http://www.telegraph.co.uk/finance/personalfinance/how-budget-affect-me/7847875/Budget-2010-Pensioners-are-the-biggest-losers.html

That, of course, is undiluted nonsense – in Britain, it took from 1832 to 1928 for the voting franchise to be extended to include all registered citizens in residence.

None of which has the least relevance to the modern left, whose ideology is technocratic rather than democratic. A cynic would argue that the left only surported democracy until they could gain oligarchic status, now they’re pulling up the ladder. As I said, the progressivist model is something like the EU, with a trivial democratic component and rule by appointed technocrats.

Economists have long since recognised that unregulated markets don’t necessarily result in efficient outcomes in the sense that resources couldn’t be reallocated so as to make some better off without making others worse off. This was the professional consensus 50 years ago:

A consensus isn’t necessarily right. Keynes was simply wrong; his theory has numerous easily demonstrable flaws (the most egregious being the infamous multiplier).

The “efficient outcomes” argument is a straw man. Nobody says that a free market will ever produce a 100% efficient result, simply that markets tend towards greater efficiency due to market forces. But by comparing the real world to the straw man of perfect efficiency, anti-marketeers can claim anything less than perfection to be a “market failure”.

One notable error in your paragraph- a common one- is the belief that markets are about “allocating resources”. They aren’t. They are about production of high value goods from lower value goods. As such, they are not a zero sum game. Again, the error is to compare the real market- in which some people are more productive than others- to an egalitarian distribution of goods and declare failure. Markets aren’t supposed to produce equality of distribution, since they reflect differences in economic output from different citizens. If you want a system that fairly reflects the production of the worker, you can’t have “fair” eqaulity of distribution. You’ll have to expropriate the more productive worker to reward the less productive. Choose.

The question anyway is, accepting that markets make mistakes, whether government intervention can reduce the oscillations, as Keynes’s theory thought it would. The recent total market collapse due to errors by the nationalised, government policy driven, state banking system ought to be enough proof that that is not true, but better proof still is Hoover and Roosevelt’s transformation of the 1929 recession into a catastrophic decade of depression, by Keynesian style intervention. All the evidence tells us that markets make mistakes, but governments make them considerably more disastrous.

While I’m here-

Mr Cameron will explain how 5,000 trained community organisers will help his big idea take off in less well-off areas. The Government plans to invest £470m over the next four years and its Big Society Bank will have an initial budget of £200m.

Something I can never find spelled out about this is, is it going to be a “bank” in the sense of lending money, or is it just a clever name for a grant making body?

@15

Much of that is just silly if not actual nonsense.

I wasn’t defending Keynes down to the fine detail – which you seem not to have noticed.

Keynes’s contribution – as well as the contributions of his contemporaries, Kalecki and Tinbergen – was in changing the way in which (most) economists analyse macroeconomic activity and prescribed stabilisation policies. His attempt to understand how economies could get stuck over long periods with a high level of unemployment yielded a very different kind of economics to that of his predecessors.

Of course, his theory has been interpreted, amended and developed many times over since publication of the General Theory in 1936. A recent contribution is Roger Farmer: How the economy works (OUP 2010). But – and this is the important take – we are still in the realm of analysing the spending factors driving aggregate demand and understanding why that won’t necessarily ensure low levels of unemployment.

The fact is that the governments of G7 economies responded to the recessions of 2008 by applying fiscal boosts to revive their respective national economies – a typical “Keynesian” response. And btw Alistari Darling’s fiscal boost of £28 billion announced in his PBR report of November 2008 was relatively modest as compared with other G7 economies.

“One notable error in your paragraph- a common one- is the belief that markets are about ‘allocating resources’. They aren’t. They are about production of high value goods from lower value good.”

That’s just silly. There’s the regular perennial issue of why so many cars (or TV sets) are made and bought compared with software produced and sold as well as how firms strive to produce and sell goods and services at higher prices.

“If Nick Clegg and David Cameron don’t listen, then we don’t have a coalition. We have a merger.”

Exactly. This isn’t really a government, it’s an unproductive, unimaginative business partnership, exploiting corporate welfare for the benefit of themselves and their small clique of friends:

http://perelebrun.blogspot.com/2011/02/well-duh.html

Fools who support them need to stop parroting middle-market gibberish about ‘the burden of the state’ and realise this ‘government’ is engaged in a very private heist – and trying to blame the victims as it clears off with the family silver. To trumpet ‘democracy’ one must also acknowledge the concept of a common wealth, otherwise democracy is just another marketing slogan.

The Tories are moving towards an African plutocracy, not a mature economy that took centuries of stuggle to develop a basic franchise for most of its citizens. The only ‘standard of living’ I expect to rise will be among those lucky/repulsive enough to hang out with ‘Dave’ and his chums.

Keynes’s contribution [...] was in changing the way in which (most) economists analyse macroeconomic activity and prescribed stabilisation policies. His attempt to understand how economies could get stuck over long periods with a high level of unemployment yielded a very different kind of economics to that of his predecessors.

The problem was, he yielded a kind of economics that doesn’t actually describe how the economy works; he basically bundled up a bunch of antiquated fallacies in a deliberately obfuscatory and inconsistent jargon (e.g. sudden changes in the meaning of phrases like “propensity to consume”). It’s nonsense on a stick, and had he not been a well connected man, it would have sunk without trace.

Of course, his theory has been interpreted, amended and developed many times over since publication of the General Theory in 1936.

A high degree of epicycles bodged onto a theory is a generally indicator that it is cobblers. See also: Creationism and “God put fossils in the ground to test our faith” etc.

But – and this is the important take – we are still in the realm of analysing the spending factors driving aggregate demand and understanding why that won’t necessarily ensure low levels of unemployment.

And “we” are doomed to failure on this, because managing aggregate demand won’t actually fix unemployment, not least because neither demand nor unemployment are understandable as aggregates. Demand for what goods? Employment in what sectors? You can’t just pump aggregate money into aggregate demand and get aggregate employment. Goods and workers are not fungible. They were crudely fungible in primitive economies with few goods and types of worker, most of whom were manual and easily transferable. In an advanced economy it is a hopeless dream.

That, and the fact that demand doesn’t cause production. Production, as the cliche goes, represents demand and thus has to precede it.

There’s the regular perennial issue of why so many cars (or TV sets) are made and bought compared with software produced and sold

I have genuinely no idea what you mean by this. Are you saying that there are too many cars being produced in the economy? On what basis? What is the correct figure for car production, and of what marques and models? Too little software? Too little compared to what?

as well as how firms strive to produce and sell goods and services at higher prices.

Eh?

19: Ian B.

“It’s nonsense on a stick, and had he not been a well connected man, it would have sunk without trace.”

That’s interesting. Especially as Keynesianism led to a rapid rise in the standard of living, near-full employment, greater productivity, scientific innovation, greater equality and more democratic engagement than we’ve had before or since.

If you’re advocating the discredited hot air of the neoliberal/monetarist model – well that’s led to a huge decline in wages in comparison to living costs, brutal polarisation between rich and poor, industrial inertia, massive increases in unemployment and prison numbers, a continuing housing crisis, and widespread apathy among voters in the west.

But I suppose that’s ‘the will of the people’. Good job we have Dave to seal the lid for us!

So, taking Roger Mexico’s comment @ 10, lets have another go.

I think that there are a couple points I think would be interesting to explore. Again from my position, it certainly looks like there is a significant overlap within the Parties. I have seen more than enough Lib Dems spouting the type of rhetoric that would come straight from a Tory manifesto and more than enough that would get green arrowed in the Mail’s comments page.

When Lib Dems are put under pressure on panel programmes, the default position they take on the cuts is indistinguishable from the most foam mouthed Tory screamer: The deficit was caused by the government’s spending on the poor and the disabled. Even Simon Hughes said as much on the piss poor !0 o’clock thing the other night. (BTW, it is pretty sad that Jimmy Carr has got more to say on the banks than the front bench, but hey ho). Poor old Hughes was reduced to claiming that they have managed to take poor people out tax! Okay, he was up against Mitchell, but for fuck’s sake, surely a real interviewer with a backbone would have smacked him over the head with that one? Christ, I was squiring when he trotted that out, but then again, he got away with it, so the end justified the means I suppose.

Irrespective of what the various social positions that the two parties may have, it is pretty obvious that the when it comes ideological cuts agenda and protecting the bankers, they are the same Party. Check out the ruthless way the Lib Dem peer was removed from his ‘unofficial post’ for having the audacity to suggest that Osborne’s measures where not robust enough. Gone in a minute, why? Surely two separate Parties can have legitimate disagreements over policy, if not, what is the point of having two Parties?

Here is a thought experiment for the Lib Dems among us. Let us imagine an hour before the Clegg/Cameron marriage, an ashen faced Cameron came in and announced that his backbenchers where in open revolt move and threatened to push for another election unless they got some ‘concessions’. They want a couple of things: Firstly to protect education and ‘the family’ the want a complete ban on male homosexual primary school teachers and on security, they want all Muslims removed from serving in the military. Are you still interested in the coalition? Given that you appear to be willing to allow the Tory attack dogs onto the throats of the Country’s most vulnerable members and are willing to subject hundreds of thousands to the dole queues, would another couple of thousand make a difference to you? Or is it the ‘type’ of people who are at the bottom of pile getting the seven shades kicked out of them that concerns you? The dinner lady and the cerebral palsy sufferer, well they had it coming, but the middle class teacher (perhaps a neighbour) is a step too far? Where are the lines?

Is it simply that the Lib Dems have the eyes on the bigger prize? Once these cuts take root, this will lead the to the biggest middle class tax cut in our history?
Is this what your Party is all about? Fucking the lives of the people in the worse condition for a measely few quid to the richest people in society? Is that what you joined politics for? Then why didn’t you join the Tory Party in the first place?

I am old enough to remember the name of the last party who got tangled up with the Liberal Party. The Social Democratic Party died a death after a vampire-like attack, but I think the shoe is on the other foot this time.

@19: “The problem was, he yielded a kind of economics that doesn’t actually describe how the economy works . . It’s nonsense on a stick, and had he not been a well connected man, it would have sunk without trace.”

That is just rubbish – as can be easily appreciated by reading economics texts before and after Keynes’s General Theory and noting the divergent explanations for persistent unemployment. As hinted in my earlier post, Kalecki and Tinbergen independently developed similar insights to Keynes in a realisation that what happened to an economy and employment depended on the factors affecting aggregate demand for goods and services. The previous perspective was that unemployment was either voluntary or due to a temporary aberration which could be rectified by general wage cuts and biking in search of a job.

For an early interpretation of Keynes’s General Theory – which Keynes endorsed – try JR Hicks on: Mr Keynes and the Classics from Econometrica 1937
http://stevereads.com/papers_to_read/keynes_and_the_classics.pdf

Hicks much later disowned that interpretation saying it was too static.

Far too much effort goes into defaming Keynes. Try instead modern mainstream texts on macroeconomics – eg Manfred Gartner: Macroeconomics (Financial Times, 2009), which pays special regard to policy implications.

Roger Mexico uses 1 million words to sum up what I did in 2 lines.

As for the free market, bullshitting right wing troll, he uses 10 million words to say nothing. trolls do so like the sound of their own voiuce.

@10 Roger Mexico: “The ‘Orange Book’ Lib Dems are still very much a minority in their own Party, hardly existing outside the chattering classes. There were never very many of them and their numbers have been lessened by Cameron making the Conservatives more acceptable for those with liberal social views (now massively in the majority).”

It is true to say that the Orange Book LibDems are a minority, but their contribution to liberalism is significant. For many years, the LibDems drifted too close to social democracy, adopting managerialist policies. The Orange Book helped remind the party of its liberal roots. Its impact was philosophical.

The Conservative party has become more socially liberal but it is still tainted by connections with the obnoxious right. It isn’t a magnet that attracts LibDems or non-aligned liberals; Cameron has to continually manage the Conservative party to prevent it from exposing its repulsive core.

@19 Ian B: “I have genuinely no idea what you mean by this. Are you saying that there are too many cars being produced in the economy? On what basis? What is the correct figure for car production, and of what marques and models? Too little software? Too little compared to what?”

Global capacity for car manufacture has outnumbered sales by 20%+ for as long as I can remember. Often excess capacity remains latent; at other times, manufacturers over estimate sales, so unsold cars are stored on airfields while someone works out how to sell them at a discount. Remember that excess capacity may have an efficiency cost; if a manufacturing plant is optimised to make 100,000 cars per annum but demand requires 50,000, that is bad news even if the company sells every car. Example: Saab.

Given that cars are a fashion accessory for many buyers in the west, excess capacity is inevitable. Manufacturers cannot build family saloons and 4×4 pickups using the same plant, which builds inefficiency into the process. Perhaps, as India and China switch from family ownership of motorcycles to practical cars, global excess capacity will fall. And it will probably increase when consumers in those countries become wealthier and their purchase desires become less rational.

Capacity is not about “marques and models”, but about types. In Europe, one factory manufactures small hatchbacks for Toyota and Citroen, and that factory could make any small hatchback with little adjustment. But it couldn’t make a Toyota Land Cruiser.

The comparison of cars and software is unfortunate. 95% of the manufacturing cost of software is up front money (programming, testing, research), and the output may be a box containing a CD and manual. Or the output may just be bits and bytes, delivered over the internet.

You can build the worst car in the world (see Crosley or Peel) and eventually it will be sold. There’ll be no profit, but the car will not go to the crusher immediately. Outside of the intellectual input, software has little value. If it doesn’t sell then the product box gets sent to the recycler.

@25: “The comparison of cars and software is unfortunate. 95% of the manufacturing cost of software is up front money (programming, testing, research), and the output may be a box containing a CD and manual. Or the output may just be bits and bytes, delivered over the internet.”

The comparison made was deliberate, timely and apt. Software producers have to decide how much finance to sink up front in development costs. Car manufacturers also have to sink significant money in R&D and in setting up assembly lines before production but whereas the marginal cost of producing another car is certainly positive, the marginal cost of selling software to an additional user verges on zero.

In both cases, decisions about the hiring and application of resources with alternative uses have to be made by business managers in firms – or by planners in command economies.

Economic issues arise in both cases and in both cases there is the potential for market failures because of economies of scope and scale, which implies that larger producers will generally have lower average costs than small producers and marginal costs will be lower than average costs. In consequence, the markets for both products are likely to fall well short of the requirements for perfectly competitive markets – the producers of both products are likely to be able to exercise significant influence over product prices as compared with the producers in competitive markets.