Just because some people can't afford things doesn't mean those things aren't over-produced. Every year there are a large, large number of brand new cars that don't get sold, and are marked down when the next model year comes in. Likewise there are structures that get built and never sell out. A building of condos near my house never got bought, so they turned them into apartments for far, far cheaper than they were priced as condos. We overproduce clothes so much that there are several nation-wide retail stores specializing in overstock merchandise for very cheap (TJ Maxx for example). All of these things are places where we have more than necessary production, so priced get driven down to where they are more affordable for poorer people.
The person you replied to said "production isn't the problem, distribution is", and you seemed to agree with that in your comment. Getting poor people cars and houses and services isn't a production problem, it's a distribution problem. It's a pricing problem. It's an efficiency problem. Producing more cars isn't going to make them easier for poor people to afford.
That doesn't really make a lot of sense. Demand is pretty predictable for stuff like that, and the producers have no reason to waste resources producing more than is necessary.
And even when they do overestimate demand, like you said, it gets marked down. So it all gets consumed in the end, and the producers might not even take that big of a loss depending on how much it was marked down. And the poor people benefit from that too of course.
Unless people start throwing away new cars then they aren't over producing.
Except there isn't one producer, there's many competing ones, so you have overproduction because everyone hopes to get more market share than they actually have. Over that, there's overproduction in many areas (especially food) for a very silly reason - that people will buy more when there's more stuff around it (aka. no one wants to buy the last few carrots). It doesn't get consumed, and poor people don't benefit from it. It gets thrown away.
About throwing away new things - heard of planned obsolescence? That's what companies now do to cope with falling demand. Yes, your car maker does it too.
Large corporations are not stupid. They have decades of sales data. They can definitely predict demand a year in advance, and they do.
I don't actually think they are overproducing. They make a huge markup on new cars, so having to discount a few that don't sell isn't a loss.
Also factories are pretty much large fixed costs. Overproducing actually doesn't cost that much. The car might only cost $500 worth of raw materials, but the cost of the factories and infrastructure necessary to turn that into a car is massive.
>(aka. no one wants to buy the last few carrots)
Which is literally only true for vegetables, not the economy in general. And you only need to sacrifice a handful of vegetables to for it, so it's a fixed cost.
Look at the Cash for Clunkers program a few years back. People were paid to bring in their old, but still functioning cars, and buy new ones. Many of those old cars were still fully functioning, and not that old. We have the production capacity for so much more than we actually make. You're right, they can predict sales so they're not making 1,000,000 units more than they can sell, but they CAN make that many. The thing about overproduction is, like you mentioned, it doesn't last for long. Demand drops, they shut down plants, they close shifts, they fire workers. Believe me, I live in Michigan and have many friends and family workers who work (or worked) in the auto industry. We have the ability to churn out hundreds of millions of more cars every year than we actually do. Like you said, we don't do that because it doesn't make financial sense.
But just because we don't overproduce right now doesn't mean we couldn't if we wanted to. I'm still not seeing where production is the problem. If production was the limiting factor, they would be running the factories 24/7 instead of shutting them down. The only reason to underproduce is to increase demand. But if you lower supply and demand doesn't increase, you've already been overproducing. So if they're closing factories, it means they've been overproducing.
>Look at the Cash for Clunkers program a few years back.
Which was done just after a recession. That's not evidence of overproduction in general, just one year when demand unexpectedly went down.
>But just because we don't overproduce right now doesn't mean we couldn't if we wanted to. I'm still not seeing where production is the problem. If production was the limiting factor, they would be running the factories 24/7 instead of shutting them down.
But if we can produce so many cars, why are cars still expensive? Shouldn't the ability to create massive supply drive the price down a lot?
There are plenty of people that want new cars. And are willing to pay for them. It's not like we have more cars than people actually want. It just costs a lot to make a car. And that cost includes fixed costs like the factory itself. But factories wouldn't be closing down if other costs weren't also very large.
Yes in theory we could make millions more cars than we do. But not for free. It would require buying more materials, hiring more workers, building new production lines, etc. Those costs must be greater than the expected return for selling another car. Otherwise they would already be doing it.
Just because I can't make a product cheaper doesn't mean I can't produce more of it. Why don't we make cheaper and cheaper cars? Because people who can afford new cars would rather spend more money to get nice features and safer cars. People who can't afford new cars would rather buy a used car with nice features and a good safety rating. We've had several sub-$10k on the market. They don't sell well. No one wants to buy a brand new Geo Metro or the original Kia Rio or a Chevy Tracker when they can buy a five year old Ford Taurus that is better equipped for cheaper. The used car market is the reason we don't have cheaper brand new cars, not production. And luckily we have so many used cars because we produce so many new cars every year.
But again, we're talking economics right now. The subject is production. Once again I ask: you said we're limited by our ability to produce, do you have anything to back that up? And no, saying "it costs a lot of money" is not proof of a production bottleneck, it's proof that companies hire accountants.
So at this point I'm going to step away from this conversation because I don't think it's going anywhere. You've made me think a bit about economics, so thanks. Good conversation.
The statement "the US is out of demand" is equivalent with the statement "we are producing more than we need". Don't argue with me, argue with the parent.
What I'm arguing for is on how we should look at universal basic income. Some people see UBI as a way to increase aggregate demand. I see UBI as a way to get rid of poverty, so there would be no such thing as what you call "the poor". The difference is that I don't see a lack of aggregate demand as a problem. If we could rid our society of poverty without making a dent in aggregate demand, I see that as a win.
Another way to think about it is in terms of productivity. Do we really need to make everyone more productive? Do we need to be make the poor maximally productive before lifting them out of poverty? Why can't we just lift them out of poverty?
To say this is merely a problem with distribution is absurd.
There are hundreds of thousands of vacant homes in San Bernardino, there are many thousands of homeless that could easily be transported there. If those homeless were to move into those homes they would soon be evicted or arrested and imprisoned. This is an issue with ownership, not distribution.
Much food from local restaurants, cafes, and grocery stores is thrown out every day as it nears expiration. Thousands of hungry would love to enjoy this food rather than waste it. This food could be donated or even left out for people to scavenge, yet it ends up in locked dumpsters. Again, this doesn't sound like a distribution problem but instead a problem with ownership.
We do produce more than we need, if need is conditioned on ability to pay.
That's the exact same thing. If we say wealth is not distributed evenly, that's the same thing as saying that only a few people own most things and many people own hardly anything.
Redistributing wealth means spreading out ownership more.
I misunderstood. To say it is a "distribution problem" read to me as if distribution was a verb: that is to say "everyone could have what they want if only the means to move people and things around were available".
