Eschernomics

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El Nuevo Min Po Po Economía Popular, M.C. Escher
El Nuevo Ministro para la Economía Popular, M.C. Escher

Expressing frustration at recent policy failures, President Maduro announced today a new initiative to regulate the process of water current formation, as part of a drive to finally ensure water flows reliably in the correct, revolutionary direction – uphill – from now.

The President of the Republic, Nicolás Maduro, announced a series of steps to crack down on factors that “perturb the normal workings of our water flows” in order to “build a new order” that leads to “the transition towards socialism.”

Maduro vowed that the government will implement mechanisms to “adjust and regulate the entire system of hydrologic directionality in the country.”

From today, the president explained, he will launch “a civilian-military operation against wreckers and saboteurs” backed by “hydrological laws and decrees that I shall issue from time to time with the powers granted to me by sectoral laws. We’re going to go right to the nitty gritty, covering the whole of the water flow process, let everyone get their documents ready, their reservoirs, we’re going to go see up to the last reservoir and the last drop of water, it will be a great operation for balance, based on supervision…”

It’s easy to make fun, but in some ways it really is tragic. Because I don’t think they’re faking it. I think they genuinely don’t understand why it can’t work.

These people’s ideological blinders are strapped on so tight, they will probably never grasp how their policies have led directly to the economic disaster the country is going through.

The nub of it is a deep, obdurate obscurantism on the process of price formation. The notion that prices arise organically through the interplay between producers’ and consumers’ preferences is so far beyond their grasp they don’t even get how much they don’t get it.

The trouble, you see, is that while you can set prices by decree, you sure can’t set preferences that way.

Why that might matter is just one more thing that eludes these clowns. And yet matter it does: over time, the misallignment between people’s preferences and administratively-set-prices must lead to shortages – can only lead to shortages – cannot NOT lead to shortages.

You can pass all the laws in the world saying that a cabilla must cost 5 times more than a topocho. But if people collectively want cabillas 10 times more than they want topochos, you will end up with too many topochos and too few cabillas. Guaranteed.

And there ain’t no operativo cívico-militar gonna change that…

To anyone who has studied economics in the last 40 years, this is perfectly obvious. To Jorge Giordani, the idea is about as intelligible as the Large Hadron Collider would’ve been to Tutankhamun. Worse: putting it forward makes you suspect of membership in the conspiratorial clique of economic warriors working indefatigably to ensure the water keeps flowing downhill.

It really is sad to realize: a not inconsiderable part of the economic nightmare Venezuela is living through isn’t even due to malice, or ham-fisted redistributive zeal, or even to incompetence. A lot of it is plain ignorance. Just ignorance.

Don’t believe me? Click here.

1 COMMENT

    • Neddie,in order to rely on culpable ignorance, one must also be arrogant and so on and so forth the layers of the onion are peeled.

  1. “Para que nos expliquen cómo es que fijan los precios especulativos y falsos que roban a toda nuestra Venezuela”.

    The thermometer is the one that causes fever! lol

  2. …set-prices must lead to shortages – can only lead to shortages – cannot NOT lead to shortages.

    Ah, but the crux of it is that it will not lead to their shortages. As long as the issue is OPS (Other Peoples’ Shortages) there is no need for those in power to deal with something that has zero impact upon them. They have access to everything they need or want and/or the means of requisitioning it or taking it by force. If you do not, well, not their problem…right?

    I think that is what it all boils down to because as long as the peasants aren’t storming the gates with torches and pitchforks, its A-OK. It is the recurring tragedy of Latin America that goes beyond living memory.

  3. Nah, it isn’t ignorance. Maybe Maduro, who doesn’t know but that Castro is good, everybody else is bad or suspect, but I don’t even think that. Remember, Communists’ strategy is destroy in order to dominate. They can put on their suits and talk the talk, but their walk –quite open-eyed and joyful– is to destroy THEM (us and whoever ain’t the insiders). No creation wanted nor intended, just destruction. Their only creation is in talking the talk to buy time. Let’s not be naive: they know that what they do doesn’t work per our standards and expectations… but it’s perfect for theirs. They’re creating the perfect destruction.

    • I think Ive just founded my new favorite crazy, out of touch with common sense chavista writer. Sorry guy who said “Nueva Zelandia es más insegura que Venezuela”, you have been beaten in the “I just don’t get it department”.

    • He has great insight! He recognizes that before long Venezuela will be forced to print 20,000, 30,000, million bolivari notes como Zimbabwe

  4. Quico bait: what the opposition should do… Is to contact the senior economists of the major univiersities in Venezuela, get them to mobilize their colleagues across the country, have street protests finishing in a press conference, and basically say that the government is out of touch with current economic thinking. Because they’re the experts, right? Or are they teaching BS to our kids too?

    At least that’s what I would do, as a biologist, if my president would go on TV every day saying that AIDS is not caused by a virus, or that evolution is just another hypothesis as likely as creationism, or any other scientific fallacy.

  5. I counted seventeen profanities in that aporrea piece…The essence of marginalidad in an article about economics written by someone who doesn’t even understand the concept of supply and demand. Aporrea does not disappoint.

  6. Quico, Every one knows that “tucarro.com” and “tuinmueble.com” publish the adds of the owners/sellers but do not fix prices, prices are fixed by owners/sellers (chavistas and rancia oligarquia). I cannot believe Maduro and company are not aware of this.

  7. Quico, I am brazilian, economist and someone who follows the Venezuelan economic and political scenario very closely, reason why I am a regular reader of CC and really appreciate the depth and quality of your posts. This is the first time I post a comment, mainly because I dont feel at ease ellaborating on my neighbor’s stuff while I think that we (brazilians) have too many unsolved and worrisome issues to address here, and also because it is of course your stuff. In the context of my business interests I have traveled a lot to Venezuela in the last 8 years or so and have had the opportunity to meet lots of senior and middle level people in government and of course business people as well. I have been even crazy enough to circulate in places like Petare and Catia (similar to our “favelas” here) in order to try and get a thorough understanding of the local reality. I have not had any business in the last 2 years or so but continue to be interested – and somehow worried.
    My personal impression is that the leadership is completely lost. The kind of stuff that they have produced – and the issue covered in your above post is a key example – reminds me of some periods of total insanity here in Brazil, when, for instance, during the Sarney administration, the government tried to control the actual population of cattle in the farms, by using even helicopters to control cattle movement, in an open war with the local “acaparadores”, in order to try and “control” retail selling prices of basic foods. Anyone who has had the opportunity of knowing Venezuela’s enormous potential, its young and energetic population, its abundant natural resources and the benefit of having a relatively small population cannot avoid to wonder where the current leadership might take the country to. I wish that you guys can articulate a wise path out of the current “ideological and economic ignorance nightmare”. I sincerely wish that things do not move in the direction set out by the average approach of the Aporrea writers,

  8. Si la naturaleza se opone… it all stems from the idea that you can control nature, the laws of physics, the economy, and so on. At every decision point they will come up with a new plan to control something, actually believing this will solve the problem, but in fact only making it worse.

    It is very sad.

  9. Don’t believe me?
    Sure I do:

    article “Hacer cola, es bueno” from aporrea http://www.aporrea.org/actualidad/n237364.html
    Un estudio de la Universidad de Chicago establece que: “Cuando la gente espera, le da un valor más alto a lo que está esperando, y ese valor más alto los hace más pacientes” (gee, a virtuous circle, the longer the wait the more patient, the more patient the longer you don’t mind waiting, you can’t lose with this)

    also in Aporrea http://www.aporrea.org/internacionales/a171977.html
    El problema del dólar paralelo no tiene solución dentro del ámbito del dólar. Cualquier mecanismo en dólares pensado para hacer bajar el dólar paralelo sólo contribuirá a su alza. Hace falta otra moneda internacional, donde los venezolanos no estén posicionados, para contrarrestar el alza del dólar norteamericano. Esa moneda es el Yuan. China, primer exportador mundial, está en capacidad de suplir todas nuestras importaciones, a precios compatibles con nuestros ingresos. Es sólo cuestión de lograr un Acuerdo Cambiario.
    Señor presidente: hágale un inmenso favor a los venezolanos y a la revolución bolivariana. Dígale al ministro Merentes y al presidente del BCV que le preparen un Acuerdo Cambiario Venezuela-China, bien traducido al chino, a una tasa Bs./Yuan compatible con nuestros niveles de ingreso, y se lo envía por email encriptado a Yang Jiechi, canciller chino, para que incluya este punto en agenda y sea discutido personalmente en la entrevista que Ud. y Xinping sostendrán en Beijing. Si Ud. logra este acuerdo, en pocos meses se desinflará el dólar paralelo, bajará la inflación, se acabará el desabastecimiento y Venezuela habrá dado un gran paso hacia el sueño de ser una potencia, como quería nuestro Comandante. Ahora Cadivi y Sicad, en vez de dólares, entregarán yuanes a nuestros importadores, a una tasa única Bs./Yuan conocida de antemano por todos los sectores. Ud. pasará a la historia como el presidente que le puso fin a un problema que nadie había podido resolver en 30 años, le habrá hecho un gran servicio a la economía de nuestro país y muy probablemente será reelecto. Buen viaje, señor presidente.

    So waiting in line is good for us because it teaches us the true value of things and is a virtuous circle and inflation is supposedly caused the US Dollar appreciating and the latter occurs because the US and Venezuela do not have “un Acuerdo Cambiario” (in fact the USD has been losing value without pause since 2002).

    Hummph…..

    Some people really believe that to think is to concatenate various harmonic slogans in the manner of a musical composition.

    • “Dígale al ministro Merentes y al presidente del BCV que le preparen un Acuerdo Cambiario Venezuela-China, bien traducido al chino, a una tasa Bs./Yuan compatible con nuestros niveles de ingreso, y se lo envía por email encriptado a Yang Jiechi, canciller chino”

      Please do that.

      The Chinese will be laughing so hard that the peals of laugh will be listened in Caracas…

  10. It is not ignorance. Rather it is fanatical belief in principles which are absolutely incompatible with real economics: “economic justice”, mainly. Prices and wages ought to be “just prices”. Therefore anyone who sells at higher prices or won’t buy at the “just price” os immoral. Furthermore, the “just prices” are presumed to be compatible with real conditions. When “market” prices differ, it must be due to malicious conspiracy.

    Once one has internalized this concept, it becomes impossible to recognize market forces, except as forces of evil.

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