Now, the way I see it, what's currently taught in economics and finance classes in America is this concept of globalization, free market, capitalism, and less taxes/regulation = increased economic prosperity.
I want to go ahead and say that's crap.
First, one of the central tenets of modern capitalism is this concept that the "free" market leads to benefit for everyone. They think that things naturally move to an equilibrium in demand/supply/price if left alone. The rationale for this is that people, with enough info, are perfectly rational beings that make the best choices.
The problem with this theory is it doesn't account for the destructiveness of monopolies. In business, anytime a group has either grown or merged into a large enough economic body, they can start to implement destructive strategies like dumping a ton of their products at a very cheap price onto a foreign market and wrecking the local competition. This is validated by capitalism and the free market because this is merely a strategy to increase market share, and if they have the resources to engage in such an act, then they have every right to.
Over the span of a few years, this group demolishes the local competition and creates a monopoly. Then they jack up the prices a ton and win back all the profits they gave up with this strategy. Except once they've recouped their investment, they continue to do it perpetually. This is a win-lose scenario. Yet, it's an example of what happens on the "free" market. This doesn't lead to constant competition and cheaper prices/higher quality for everyone. This leads to a stagnant market where one giant is in control and sells at exorbitant prices because they are the controllers of all supply.
In capitalism, it's theorized that the only way to combat this is for another giant group to emerge. Yet, this sort of competition doesn't help at all. While the two giants are growing, they experience economies of scale and their efficiency increases. Yet, once they reach a certain size, they start to experience the DISeconomies of scale from being too bloated. But they have to continue this arms race, because if they try to scale back, the other one will have the advantage in buying power for that short window of time and can steal more market share, thus perpetuating an advantage until the guy who stepped back first is destroyed.
This creates an effect where giants are constantly forced to grow bigger to compete, even though in the long run it leads to a net loss in efficiency. This is what the free market creates.
The problems with this are obvious. This is why countries have effected protectionist policies to defend against these sorts of aggressive economic strategies. Then you no longer have a free market. It becomes mixed. Our world is full of mixed economies.
The last 30 years of economics in the USA and the world, is a constant attempt to try to bring down these protectionist strategies on the belief that free market was more efficient and beneficial for all. Peep the giant economic collapse we just had. It's pretty obvious to everyone now that this free market liberalization was a horrible idea. It destroyed local industries, it gutted nations, it destroyed whole swathes of industry in nations, and all it really did was lower the retail prices of goods.
What use are lower prices when you don't have a job?
That's the problem with the concept of free market. It's too focused on price of goods as a barometer for efficiency. It fails to address the issues of labor and wages. Now if you try to approach the labor market using capitalist and free market principles, you end up with sweatshops in China and India.
Does anyone honestly think it is a good thing to compete with sweatshop workers in terms of pay/productivity?
There is only one real way to improve labor's market value, which is training that improves their productivity. Yet, the sad truth of the matter is that even with a great education, a large proportion of the population is not that clever. They can't really be trained that far past the level of a sweatshop worker. This is what's traditionally known as "retail sector" or "blue collar."
This makes up a pretty large percentage of the world population. Yet, the blue collar workers in America don't want to work in sweat shop conditions. Capitalism and the free market tells us that the smart thing to do is just tell those blue collar workers to fuck off and move the factories to China.
This is why you see an increasing wealth disparity between the rich and poor in America. The poor have lost their jobs to the increasingly "free" labor market, whereas the rich and intelligent Americans have increased their value because they have some of the world's best education, coupled with some of the world's best tools of production.
AKA, the American factory worker must compete with the Chinese sweat shop worker.
The American Harvard graduate competes with the Chinese Beijing University graduate. Except the Harvard graduate gets to enter an organization like Goldman Sachs, with some of the world's best financial algorithms and the best financing and the best connections.
Therefore, while the free market has allowed the Harvard graduate to reach greater and greater heights by reaching the pinnacle of the financial world and reaping the benefits of competing vs the world due to massive, built-in advantages, the American factory worker has been laid off and can't find another job because he/she is now competing versus the 5 billion people of the developing world.
Do you guys see now why the free market is not helping the vast majority of America?
And if you look at the labor markets, the greatest shift has been away from manufacturing and towards retail. Yet it's a nonsensical shift. How does it make any sense when the retail industry is driven by consumption, and the consumption is paid for by wages from the retail industry?
This is like saying, I get a job at Gamestop. Then I buy a ton of games from Gamestop. Eventually, Gamestop will expand because I'm buying so many games with my wages from them, that Gamestop's sales will be enough to expand.
It makes no sense. Money is constantly being pulled OUT of the economy this way. Every time you put $50 through the system, you end up with less. First, I get the job at Gamestop. They pay me $50. Yet, I pay income tax on that $50. It then becomes $42.
This $42 is then spent to buy a game. Yet I need to supplement it with another $8 from somewhere. So, already I'm at -$8. Okay, $50 + tax = $53. Now I'm at -$11.
Then Gamestop gets their $50 and has to pay corporate tax on it. So they're down to what? $40? A net of $-21 for a single transaction between retail to employee and back to retail.
So, in every transaction of $50 of wages going out of the system, we end up with only $29 of it going back in. It's rather obvious that the US labor/wage market can not be sustained by this type of relationship.
The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.
The reason is because the tax dollars are being siphoned off. That $21 that was taken out is given to the government. Yet, the government we have today is increasingly controlled by corporations. According to current moral and economic philosophy, like that espoused by Jibba and others on TL, it's perfectly okay and constitutional for a corporation to get involved with government. On top of that, morals have no place in economic decisions. Therefore, it is completely okay for a corporation to try to pay to get laws passed that benefit the corporation.
What this means is that those $21 instead of going back into an industry that benefits the lower classes could be funneled into an industry that doesn't support hardly any of the middle-lower classes. Such as the banking industry! So, not only is the middle class losing jobs, competing with a vast number of foreign competitors, but they lose nearly half of every dollar to that mfing Harvard graduate. Because he/she is busy wheeling and dealing, screwed a bunch of people over with greedy "capitalist" ploys, and then needed a bailout.
This is how Main Street gets shafted.
On top of that, to the people who claim that of course the solution to all this is just get rid of taxes, I ask the question, ok, then where is the growth?
Sure, without taxes the $50 between me and Gamestop is cycled back and forth. Yet, that $50 will never grow. It remains $50. Therefore, even in the most ideal of circumstances, the money is not lost, it only remains the SAME. ZERO growth.
In fact, accounting for inflation, you'd still see a loss of $1-2 each year. The industry continues to lose in a perfectly ideal situation. This is why the concept of consumer-based society leading to growth is total bullshit. You cannot grow an economy by spending money. That doesn't work.
The only way to grow the economic pie is technological innovation which decreases the cost of production. This way, I spend $50, Gamestop gets their $50 back. Yet, they have factories/studios that can produce the game for only $5. Therefore, they pay me $50, I buy from them for $50, they get back $45. They can then afford to make 9 more games. With 9 more games, they can make enough money back to hire 8 more workers. This way the loop continues.
Except somewhere in the loop, the business decides that instead, they're just going to pay all those profits to the CEO. We don't need to increase that many jobs. We'll just give it to the top guys. Therefore, once again the middle and lower classes are powerless to stop the flight of money from the consumer-supplier loop.
In pretty much every way, using capitalist and free market principles leads to a loss for the middle and lower classes. This is why Sarkozy says capitalism needs to be refounded to be more moral. That finance, free trade, and competition are a MEANS not an end. And it needs to be redefined and reinvented.
It's because morons run around trying to claim that the free market leads to increased efficiency and prosperity for all as long as everyone just makes decisions in a totally selfish manner. It doesn't. It doesn't work. The past 30 years have shown it doesn't work. It's led to disaster. The globalization and free market proponents were wrong. They did nothing but justify selfishness as a good thing.
On January 28 2010 04:32 StorkHwaiting wrote: The problem with this theory is it doesn't account for the destructiveness of monopolies.
Which is why no country have ever run a completely free market without laws to protect against monopolies. No kind of pseudo monopoly will ever get stronger than the state and if they become too much of a problem the state will stop them. Big companies like Microsoft are constantly walking on a thread trying to exert as much power as possible will still staying within the laws, the reason they haven't crushed all competition is thanks to those laws. If there is a hole it will get patched and temporary abuse do not cause that much damage, so the system is safe.
On January 28 2010 04:32 StorkHwaiting wrote: The problem with this theory is it doesn't account for the destructiveness of monopolies.
Which is why no country have ever run a completely free market without laws to protect against monopolies. No kind of pseudo monopoly will ever get stronger than the state and if they become too much of a problem the state will stop them. Big companies like Microsoft are constantly walking on a thread trying to exert as much power as possible will still staying within the laws, the reason they haven't crushed all competition is thanks to those laws. If there is a hole it will get patched and temporary abuse do not cause that much damage, so the system is safe.
Maybe in Sweden. Not in the US. And way to take the shortest soundbite you can find and then making a ridiculous generalization like "the system is safe."
In the USA, we have this new Supreme Court ruling that said corporations can get as involved with politics as they want. GL passing anti-trust laws when half the senate is in Microsoft's pocket. Sort of like passing anti-trust laws in the health industry. Doesn't happen.
A capitalist will tell you that capitalism is the best system because people are rational actors.
Show them the sum total of human psychology research as counter-evidence to this claim (as well as the fact that marketing exists as a profession) and rather than admit they are wrong they will insist that those people do not deserve to succeed.
False. The reason for these problems is not economic, but political. The problem is frequent elections and no term limits. This creates a drive for commanding the most support, which means gaining financial and constituent backing from corporate interests. Elected officials then appoint people to other positions (e.g. the Supreme Court) who will help create favorable conditions for their reelection. The way to remove the claws of corporate America from its government is not by attacking the corporations, but by nullifying the problem entirely. How do we do this? Term limits and limitations on public service. Only then will we have an America that is influenced by the goals of its people, not by the selfish goals of its leaders.
The one drawback to this solution is maintaining a balance of experience. Congress is so convoluted that it takes multiple terms to gain the understanding of the system required to accomplish anything. Perhaps this is an effect that will subside with reduced incumbency? That is unsure.
The question isn't whether free market economy + capitalism is without flaws. There isn't a single system or set of laws in the universe that is w/o flaws that I can think of regarding any aspects of life, let alone something as massive and wide ranging as economy on a global scale. Rather than a long winded post resolved in provoking an argument; you should aim to provide a solution.
But there in lies the problem. There is no solution without its flaws as well. It has, and always will be, easier to insult, degrade, and put down than come up with the right solution. Politicians learned that decades ago. As others have also stated, your post is neither edgy or provocative. Anybody who has taken the simplest business course in high school or college, or simply been a member of the work force long enough, knows about the issues we all face.
Oh, and just to be clear: outside of the business leaders, extremely wealthy, and nutjobs I don't think you'll find many in America who think "less taxes/regulation = increased economic prosperity." If they did, Ideally the current economic slump should prove otherwise if they hadn't all ready learned it form the Great Depression.
On January 28 2010 04:54 heyoka wrote: It always blows my mind that people think this is somehow edgy or provocative. Are there people out there who will argue against it?
hi zep!!!
I'd argue that knowing this is irrelevant because cultural influences make the knowledge rarified by default, which makes the ability to enact meaningful change through a system based on majority voting useless.
Its far easier to call michael moore crazy than to ask "well, why is flint so poor?".
More importantly, the concept of monopolization and the forces which lead to it are also VERY WELL represented in the parties that form our governments, which means that even if our institutions wanted to change, the forces against them will prevent them from doing so. Does anyone think they can found and lead a third party to national relevance in the next decade in the US? Does anyone see the success of the canadian conservative government stemming from the amalgamation of all prior right of center parties?
History is going to look back at us and kinda sigh "why didn't you guys examine the obvious evolutionary path of your institutions before letting them run wild?". Then again, this cycle is repeated pretty much ad nauseum throughout history, so we wont' be the only target of derision.
How can you pretend to make a serious topic and quoting Sarkozy lol ? This guy is the same guy who was praising the subprime mortgages three years ago. Now he fakes to change sides because he doesn't want to be stomped at the next election. This guy is a fucking joke and doesn't believe what he is saying. Do you think that a guy who is friend with pretty much all the richest guys in France and who has cut taxes for them will do something ? He is here to cut taxes ( but only for rich people obv ), destroy the public sector and sell the last public firms to his friends.
On January 28 2010 04:32 StorkHwaiting wrote: It doesn't work. The past 30 years have shown it doesn't work. It's led to disaster. The globalization and free market proponents were wrong. They did nothing but justify selfishness as a good thing.
I agree with lots of your points if you just look at one country. However global prosperity and living standarts have improved a lot over the last 30 years thanks to globalization. So while the situation for an american blue collar worker might have become harsher, on a global perspective they have become better. So maybe it is just you who is selfish because you only look at the situation in your country and fail to see the millions of lives that improved thanks to globalization?
However global prosperity and living standarts have improved a lot over the last 30 years thanks to globalization.
How do you know they're because of globalization instead of far more powerful forces, like the green revolution or a vast number of technological advances?
On January 28 2010 04:54 heyoka wrote: It always blows my mind that people think this is somehow edgy or provocative. Are there people out there who will argue against it?
hi zep!!!
Hi!!!!
yeah tons of people will argue against it, even now lots and lots of Americans (possibly even a majority) think that the banks failed and the market crashed in 2008 because they were constrained by burdensome regulations and if we remove regulations and cut taxes, businesses will have their hands free to create jobs and treat their workers better (even though by continually cutting taxes and regulations for the past 30 years the average worker is now worse off than they were when Reagan took office)
On January 28 2010 04:54 heyoka wrote: It always blows my mind that people think this is somehow edgy or provocative. Are there people out there who will argue against it?
hi zep!!!
I'd argue that knowing this is irrelevant because cultural influences make the knowledge rarified by default, which makes the ability to enact meaningful change through a system based on majority voting useless.
Its far easier to call michael moore crazy than to ask "well, why is flint so poor?".
More importantly, the concept of monopolization and the forces which lead to it are also VERY WELL represented in the parties that form our governments, which means that even if our institutions wanted to change, the forces against them will prevent them from doing so. Does anyone think they can found and lead a third party to national relevance in the next decade in the US? Does anyone see the success of the canadian conservative government stemming from the amalgamation of all prior right of center parties?
History is going to look back at us and kinda sigh "why didn't you guys examine the obvious evolutionary path of your institutions before letting them run wild?". Then again, this cycle is repeated pretty much ad nauseum throughout history, so we wont' be the only target of derision.
The information is fine and the discussion is valid. Framing it as LOOK GUYS I'M GONNA BLOW YOUR MIND ARE YOU READY TO BE SHOCKED AND PROVOKED I WILL CHANGE THE WAY YOU THINK ABOUT THE WORLD is ridiculous.
On January 28 2010 05:00 I_Love_Bacon wrote: The question isn't whether free market economy + capitalism is without flaws. There isn't a single system or set of laws in the universe that is w/o flaws that I can think of regarding any aspects of life, let alone something as massive and wide ranging as economy on a global scale. Rather than a long winded post resolved in provoking an argument; you should aim to provide a solution.
But there in lies the problem. There is no solution without its flaws as well. It has, and always will be, easier to insult, degrade, and put down than come up with the right solution. Politicians learned that decades ago. As others have also stated, your post is neither edgy or provocative. Anybody who has taken the simplest business course in high school or college, or simply been a member of the work force long enough, knows about the issues we all face.
Oh, and just to be clear: outside of the business leaders, extremely wealthy, and nutjobs I don't think you'll find many in America who think "less taxes/regulation = increased economic prosperity." If they did, Ideally the current economic slump should prove otherwise if they hadn't all ready learned it form the Great Depression.
What? I did propose a solution, albeit an aspirational one rather than a detailed economic proposal. It's the same one as Sarkozy. The philosophies of capitalism need to be reformed with a moral purpose in mind, rather than relying on puritanical Capitalist ideology.
And just to be clear: if Americans didn't think less taxes/regulation = increased economic prosperity, the Republican party would lose every single election.
This is the rhetoric that has been espoused in America for the last 30 years. This is the economic philosophy the WORLD has been operating on for the last 30 years. Don't tell me some crap like "this isn't edgy or provocative." If it wasn't provocative, then why was the entire world marching to this beat for decades? And why did it take a massive slap to the face like this last recession to make people wake up and smell the coffee?
Just because I'm posting it now doesn't mean I didn't hold the same view ten years ago. I don't give a shit about being edgy. That was just Heyoka's queer little insult he felt needed to be expressed. It's the fact that this recession was such an epic vindication of my positions (and of many other minority economic thinkers). It is a great thing to see that the world leaders are FINALLY starting to see the light. This view has been the MINORITY for a long time. And I'm amazed you think it hasn't been the minority view.
Now, the way I see it, what's currently taught in economics and finance classes in America is this concept of globalization, free market, capitalism, and less taxes/regulation = increased economic prosperity.
I want to go ahead and say that's crap.
First, one of the central tenets of modern capitalism is this concept that the "free" market leads to benefit for everyone. They think that things naturally move to an equilibrium in demand/supply/price if left alone. The rationale for this is that people, with enough info, are perfectly rational beings that make the best choices.
The problem with this theory is it doesn't account for the destructiveness of monopolies. In business, anytime a group has either grown or merged into a large enough economic body, they can start to implement destructive strategies like dumping a ton of their products at a very cheap price onto a foreign market and wrecking the local competition. This is validated by capitalism and the free market because this is merely a strategy to increase market share, and if they have the resources to engage in such an act, then they have every right to.
Over the span of a few years, this group demolishes the local competition and creates a monopoly. Then they jack up the prices a ton and win back all the profits they gave up with this strategy. Except once they've recouped their investment, they continue to do it perpetually. This is a win-lose scenario. Yet, it's an example of what happens on the "free" market. This doesn't lead to constant competition and cheaper prices/higher quality for everyone. This leads to a stagnant market where one giant is in control and sells at exorbitant prices because they are the controllers of all supply.
In capitalism, it's theorized that the only way to combat this is for another giant group to emerge. Yet, this sort of competition doesn't help at all. While the two giants are growing, they experience economies of scale and their efficiency increases. Yet, once they reach a certain size, they start to experience the DISeconomies of scale from being too bloated. But they have to continue this arms race, because if they try to scale back, the other one will have the advantage in buying power for that short window of time and can steal more market share, thus perpetuating an advantage until the guy who stepped back first is destroyed.
This creates an effect where giants are constantly forced to grow bigger to compete, even though in the long run it leads to a net loss in efficiency. This is what the free market creates.
The problems with this are obvious. This is why countries have effected protectionist policies to defend against these sorts of aggressive economic strategies. Then you no longer have a free market. It becomes mixed. Our world is full of mixed economies.
The last 30 years of economics in the USA and the world, is a constant attempt to try to bring down these protectionist strategies on the belief that free market was more efficient and beneficial for all. Peep the giant economic collapse we just had. It's pretty obvious to everyone now that this free market liberalization was a horrible idea. It destroyed local industries, it gutted nations, it destroyed whole swathes of industry in nations, and all it really did was lower the retail prices of goods.
What use are lower prices when you don't have a job?
That's the problem with the concept of free market. It's too focused on price of goods as a barometer for efficiency. It fails to address the issues of labor and wages. Now if you try to approach the labor market using capitalist and free market principles, you end up with sweatshops in China and India.
Does anyone honestly think it is a good thing to compete with sweatshop workers in terms of pay/productivity?
There is only one real way to improve labor's market value, which is training that improves their productivity. Yet, the sad truth of the matter is that even with a great education, a large proportion of the population is not that clever. They can't really be trained that far past the level of a sweatshop worker. This is what's traditionally known as "retail sector" or "blue collar."
This makes up a pretty large percentage of the world population. Yet, the blue collar workers in America don't want to work in sweat shop conditions. Capitalism and the free market tells us that the smart thing to do is just tell those blue collar workers to fuck off and move the factories to China.
This is why you see an increasing wealth disparity between the rich and poor in America. The poor have lost their jobs to the increasingly "free" labor market, whereas the rich and intelligent Americans have increased their value because they have some of the world's best education, coupled with some of the world's best tools of production.
AKA, the American factory worker must compete with the Chinese sweat shop worker.
The American Harvard graduate competes with the Chinese Beijing University graduate. Except the Harvard graduate gets to enter an organization like Goldman Sachs, with some of the world's best financial algorithms and the best financing and the best connections.
Therefore, while the free market has allowed the Harvard graduate to reach greater and greater heights by reaching the pinnacle of the financial world and reaping the benefits of competing vs the world due to massive, built-in advantages, the American factory worker has been laid off and can't find another job because he/she is now competing versus the 5 billion people of the developing world.
Do you guys see now why the free market is not helping the vast majority of America?
And if you look at the labor markets, the greatest shift has been away from manufacturing and towards retail. Yet it's a nonsensical shift. How does it make any sense when the retail industry is driven by consumption, and the consumption is paid for by wages from the retail industry?
This is like saying, I get a job at Gamestop. Then I buy a ton of games from Gamestop. Eventually, Gamestop will expand because I'm buying so many games with my wages from them, that Gamestop's sales will be enough to expand.
It makes no sense. Money is constantly being pulled OUT of the economy this way. Every time you put $50 through the system, you end up with less. First, I get the job at Gamestop. They pay me $50. Yet, I pay income tax on that $50. It then becomes $42.
This $42 is then spent to buy a game. Yet I need to supplement it with another $8 from somewhere. So, already I'm at -$8. Okay, $50 + tax = $53. Now I'm at -$11.
Then Gamestop gets their $50 and has to pay corporate tax on it. So they're down to what? $40? A net of $-21 for a single transaction between retail to employee and back to retail.
So, in every transaction of $50 of wages going out of the system, we end up with only $29 of it going back in. It's rather obvious that the US labor/wage market can not be sustained by this type of relationship.
The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.
The reason is because the tax dollars are being siphoned off. That $21 that was taken out is given to the government. Yet, the government we have today is increasingly controlled by corporations. According to current moral and economic philosophy, like that espoused by Jibba and others on TL, it's perfectly okay and constitutional for a corporation to get involved with government. On top of that, morals have no place in economic decisions. Therefore, it is completely okay for a corporation to try to pay to get laws passed that benefit the corporation.
What this means is that those $21 instead of going back into an industry that benefits the lower classes could be funneled into an industry that doesn't support hardly any of the middle-lower classes. Such as the banking industry! So, not only is the middle class losing jobs, competing with a vast number of foreign competitors, but they lose nearly half of every dollar to that mfing Harvard graduate. Because he/she is busy wheeling and dealing, screwed a bunch of people over with greedy "capitalist" ploys, and then needed a bailout.
This is how Main Street gets shafted.
On top of that, to the people who claim that of course the solution to all this is just get rid of taxes, I ask the question, ok, then where is the growth?
Sure, without taxes the $50 between me and Gamestop is cycled back and forth. Yet, that $50 will never grow. It remains $50. Therefore, even in the most ideal of circumstances, the money is not lost, it only remains the SAME. ZERO growth.
In fact, accounting for inflation, you'd still see a loss of $1-2 each year. The industry continues to lose in a perfectly ideal situation. This is why the concept of consumer-based society leading to growth is total bullshit. You cannot grow an economy by spending money. That doesn't work.
The only way to grow the economic pie is technological innovation which decreases the cost of production. This way, I spend $50, Gamestop gets their $50 back. Yet, they have factories/studios that can produce the game for only $5. Therefore, they pay me $50, I buy from them for $50, they get back $45. They can then afford to make 9 more games. With 9 more games, they can make enough money back to hire 8 more workers. This way the loop continues.
Except somewhere in the loop, the business decides that instead, they're just going to pay all those profits to the CEO. We don't need to increase that many jobs. We'll just give it to the top guys. Therefore, once again the middle and lower classes are powerless to stop the flight of money from the consumer-supplier loop.
In pretty much every way, using capitalist and free market principles leads to a loss for the middle and lower classes. This is why Sarkozy says capitalism needs to be refounded to be more moral. That finance, free trade, and competition are a MEANS not an end. And it needs to be redefined and reinvented.
It's because morons run around trying to claim that the free market leads to increased efficiency and prosperity for all as long as everyone just makes decisions in a totally selfish manner. It doesn't. It doesn't work. The past 30 years have shown it doesn't work. It's led to disaster. The globalization and free market proponents were wrong. They did nothing but justify selfishness as a good thing.
Capitalism makes some assumptions that aren't true. It assumes that if an employer treats an employee unfairly, the employee will leave the job and work somewhere else. It assumes that if one business doesn't provide adequate service, a customer will go elsewhere. It assumes that financial success of a business directly translates to new jobs. These are all naive at best - flat out false at worst. What if there is no other job? What if you can't afford a day or an hour without your job? What if there is no other service provider available? What if shareholders get rich and buy yachts and new jobs aren't created? etc, etc.
Capitalism assumes the balance of power lies in the nature of the relationship between consumer and business, but it doesn't. Money is power and the more you have, the more potential you have to make exponentially larger sums, exponentially growing your power, either as a business or an individual. These are the people who decide how much the employed will be paid to do their jobs and how fairly they will (or won't) be treated. These are the people who decide how much debt the average low wage worker will have to take on simply to have a life of subsistence. They decide who gets cancer treatment and who doesn't. The list goes on. There is no accountability. How do you hold accountable the thing on which you depend?
Politically, you have poor people convinced they should vote the best interest of the rich, because they think if they don't the rich people won't have the money to give them jobs anymore. Also because they hope to be rich themselves one day, and don't want to pay more in taxes. You have a government that's infiltrated in every way by the influence of wealth and of private interests being represented in great disproportion to the actual population base they consist of. You have a national infrastructure designed by the rich, to support the interests of the rich.
What you end up with is what we have - a system completely controlled by a very, very small segment of the population, who's power increases day by day. You end up with a laundry list of examples of areas where capitalism has completely failed - post-secondary education, health care, workplace protection and so on.
On January 28 2010 04:54 heyoka wrote: It always blows my mind that people think this is somehow edgy or provocative. Are there people out there who will argue against it?
hi zep!!!
I'd argue that knowing this is irrelevant because cultural influences make the knowledge rarified by default, which makes the ability to enact meaningful change through a system based on majority voting useless.
Its far easier to call michael moore crazy than to ask "well, why is flint so poor?".
More importantly, the concept of monopolization and the forces which lead to it are also VERY WELL represented in the parties that form our governments, which means that even if our institutions wanted to change, the forces against them will prevent them from doing so. Does anyone think they can found and lead a third party to national relevance in the next decade in the US? Does anyone see the success of the canadian conservative government stemming from the amalgamation of all prior right of center parties?
History is going to look back at us and kinda sigh "why didn't you guys examine the obvious evolutionary path of your institutions before letting them run wild?". Then again, this cycle is repeated pretty much ad nauseum throughout history, so we wont' be the only target of derision.
The information is fine and the discussion is valid. Framing it as LOOK GUYS I'M GONNA BLOW YOUR MIND ARE YOU READY TO BE SHOCKED AND PROVOKED I WILL CHANGE THE WAY YOU THINK ABOUT THE WORLD is ridiculous.
Heyoka, get over yourself. I never framed it as that. I think you're being rather immature. The debate is without a doubt provocative. Or else why would world leaders be needing a summit to debate this very issue? On top of that, the very first thing I posted was a link to Sarkozy's points, which I elaborate upon. Therefore, at the very start I am showing that my thoughts are neither original or something that is not already being discussed. I never said anything like "I'm going to blow your mind." Seriously, stop drinking the haterade. Just because I'm passionate about the subject doesn't mean that I think I'm some messiah here to save the masses.
Really disappointed you would take this approach to my writing.
On January 28 2010 05:12 StorkHwaiting wrote: What? I did propose a solution, albeit an aspirational one rather than a detailed economic proposal. It's the same one as Sarkozy. The philosophies of capitalism need to be reformed with a moral purpose in mind, rather than relying on puritanical Capitalist ideology.
And just to be clear: if Americans didn't think less taxes/regulation = increased economic prosperity, the Republican party would lose every single election.
This is the rhetoric that has been espoused in America for the last 30 years. This is the economic philosophy the WORLD has been operating on for the last 30 years. Don't tell me some crap like "this isn't edgy or provocative." If it wasn't provocative, then why was the entire world marching to this beat for decades? And why did it take a massive slap to the face like this last recession to make people wake up and smell the coffee?
Just because I'm posting it now doesn't mean I didn't hold the same view ten years ago. I don't give a shit about being edgy. That was just Heyoka's queer little insult he felt needed to be expressed. It's the fact that this recession was such an epic vindication of my positions (and of many other minority economic thinkers). It is a great thing to see that the world leaders are FINALLY starting to see the light. This view has been the MINORITY for a long time. And I'm amazed you think it hasn't been the minority view.
The crux of the argument still lies in people making the "right" decision. Suddenly thinking, oh, well we'll make the right decision this time, doesn't quite cut it because seldom is there a clear cut correct answer that somehow lands due north so everybody's moral compass points to it.
Republicans would lose every single election if people actually voted on what was best for them or what they believed. Voting has little to do with actual needs, but instead with what basically becomes tradition passed on down families to the younger generation. And switching parties? Please, that's admitting you've had the wrong view point for the past X number of years. People would rather ignore what is best for them just to not be on the losing side of things.
On January 28 2010 04:54 heyoka wrote: It always blows my mind that people think this is somehow edgy or provocative. Are there people out there who will argue against it?
hi zep!!!
I'd argue that knowing this is irrelevant because cultural influences make the knowledge rarified by default, which makes the ability to enact meaningful change through a system based on majority voting useless.
Its far easier to call michael moore crazy than to ask "well, why is flint so poor?".
More importantly, the concept of monopolization and the forces which lead to it are also VERY WELL represented in the parties that form our governments, which means that even if our institutions wanted to change, the forces against them will prevent them from doing so. Does anyone think they can found and lead a third party to national relevance in the next decade in the US? Does anyone see the success of the canadian conservative government stemming from the amalgamation of all prior right of center parties?
History is going to look back at us and kinda sigh "why didn't you guys examine the obvious evolutionary path of your institutions before letting them run wild?". Then again, this cycle is repeated pretty much ad nauseum throughout history, so we wont' be the only target of derision.
The information is fine and the discussion is valid. Framing it as LOOK GUYS I'M GONNA BLOW YOUR MIND ARE YOU READY TO BE SHOCKED AND PROVOKED I WILL CHANGE THE WAY YOU THINK ABOUT THE WORLD is ridiculous.
Don't see how its ridiculous when the vast majority of people who post show around 0 realization of the higher order effects of the systems being discussed.
I bet the majority of the readers of this site aren't old enough to realize just how different the wages are between now and 1970 because they weren't alive buying appliances and raising a family in the 1970s.
Even if people DID know, they're just a drop in the bucket; the majority don't know and don't care.
However global prosperity and living standarts have improved a lot over the last 30 years thanks to globalization.
How do you know they're because of globalization instead of far more powerful forces, like the green revolution or a vast number of technological advances?
because it is globalization that brings technological advances and know-how to 3rd world countries.
How can you pretend to make a serious topic and quoting Sarkozy lol ? This guy is the same guy who was praising the subprime mortgages three years ago. Now he fakes to change sides because he doesn't want to be stomped at the next election. This guy is a fucking joke and doesn't believe what he is saying. Do you think that a guy who is friend with pretty much all the richest guys in France and who has cut taxes for them will do something ? He is here to cut taxes ( but only for rich people obv ), destroy the public sector and sell the last public firms to his friends.
I agree with you. The remarkable thing is that even this scumbag is starting to tout these positions, showing that even at the top, they realize that they can't go on with business as usual anymore. (This is my hope of course. I'm trying to stave off cynicism. Help me out here, Boblion!)
On January 28 2010 05:16 StorkHwaiting wrote:Heyoka, get over yourself. I never framed it as that. I think you're being rather immature. The debate is without a doubt provocative. Or else why would world leaders be needing a summit to debate this very issue? On top of that, the very first thing I posted was a link to Sarkozy's points, which I elaborate upon. Therefore, at the very start I am showing that my thoughts are neither original or something that is not already being discussed. I never said anything like "I'm going to blow your mind." Seriously, stop drinking the haterade. Just because I'm passionate about the subject doesn't mean that I think I'm some messiah here to save the masses.
Really disappointed you would take this approach to my writing.
Luls... World leaders getting together about this matter is to make it so they receive votes. As somebody earlier in this thread stated, most economic woes stem directly from political problems within the system rather than the system itself. They have little desire in actually changing the problems that exist as long as it appears they're trying to so their own nations think they're trying their darnedest.
Now, the way I see it, what's currently taught in economics and finance classes in America is this concept of globalization, free market, capitalism, and less taxes/regulation = increased economic prosperity.
what does this mean? increased economic prosperity... compared to what?
Anyways I think that free market economy makes sense in a free world. The problem is with the people, not with the system. So, regulation is necessary because of those people. So a happy medium needs to be reached.
On January 28 2010 05:22 travis wrote: Anyways I think that free market economy makes sense in a free world. The problem is with the people, not with the system. So, regulation is necessary because of those people. So a happy medium needs to be reached.
This is the internet. There exists no such platform where moderation is correct. Extreme sides must be taken. The choices are 100% free market capitalism or communism. You must choose now, as I'll allow no rationality out of you, mister.
Now, the way I see it, what's currently taught in economics and finance classes in America is this concept of globalization, free market, capitalism, and less taxes/regulation = increased economic prosperity.
I want to go ahead and say that's crap.
First, one of the central tenets of modern capitalism is this concept that the "free" market leads to benefit for everyone. They think that things naturally move to an equilibrium in demand/supply/price if left alone. The rationale for this is that people, with enough info, are perfectly rational beings that make the best choices.
I read this and already realized that you have no idea what you're talking about when it comes to economics.
For an example, consider your little Gamestop analogy:
This is like saying, I get a job at Gamestop. Then I buy a ton of games from Gamestop. Eventually, Gamestop will expand because I'm buying so many games with my wages from them, that Gamestop's sales will be enough to expand.
It makes no sense. Money is constantly being pulled OUT of the economy this way. Every time you put $50 through the system, you end up with less. First, I get the job at Gamestop. They pay me $50. Yet, I pay income tax on that $50. It then becomes $42.
This $42 is then spent to buy a game. Yet I need to supplement it with another $8 from somewhere. So, already I'm at -$8. Okay, $50 + tax = $53. Now I'm at -$11.
Then Gamestop gets their $50 and has to pay corporate tax on it. So they're down to what? $40? A net of $-21 for a single transaction between retail to employee and back to retail.
So, in every transaction of $50 of wages going out of the system, we end up with only $29 of it going back in. It's rather obvious that the US labor/wage market can not be sustained by this type of relationship.
So your entire argument is that the system is unsustainable because corporations are greedy and take out more than is put into the "system." First of all, the only thing you've demonstrated is that the US government, which is not a capitalist enterprise, last time I checked, takes out money that isn't put back in. So your entire argument that it's the corporations fault is based off of the US government taking money out through taxes.
You then to proceed to reveal your ignorance of complaining about "input" and "output" in the system by saying:
What this means is that those $21 instead of going back into an industry that benefits the lower classes could be funneled into an industry that doesn't support hardly any of the middle-lower classes. Such as the banking industry! So, not only is the middle class losing jobs, competing with a vast number of foreign competitors, but they lose nearly half of every dollar to that mfing Harvard graduate. Because he/she is busy wheeling and dealing, screwed a bunch of people over with greedy "capitalist" ploys, and then needed a bailout.
All I read here is: I don't understand why the bailout was key to preventing an across-the-board slash in all market sectors by at least 50%, but I will use popular imagery and combine it with a few numbers and classic "human" arguments and use it to justify my view on economics.
You then complain about all the so called "free-market fundamentalists" and how they are destroying the world by breaking the balance between markets and government and how deregulation is causing all these problems. But then you mention how the reason that "monopolists are such a powerful force in 'free markets'" because they can use law against the other companies to drive them out of business, when in reality that is the primary flaw of having a mixed market. That is why people want deregulation-so larger companies can't use laws to fuck over smaller competitors.
Now we do see companies today gradually consolidating over and over again. This is an example of the idea of economies of scale. But then you make the argument that they are growing so big that they are now in diseconomies of scale. So isn't it patently obvious that these sorts of companies are probably going to be driven out of business by another company that doesn't have such a diseconomy?
Instead of concentrating on popular views and very general ideas, I would focus on the more obvious problems with the free market. For instance, the idea of asymmetric information, which causes market failure, as well as what we call externalities. These are all very key ideas in the teaching of economics which you just gloss over as being free-market fundamentalists. Those are very valid arguments as to why we need to "change" capitalism. They certainly are better than the pop-crap, contradictions, and blatant generalizations that your entire argument revolves around.
Hey I just want to point out some flaws in your statements.
"Then Gamestop gets their $50 and has to pay corporate tax on it. So they're down to what? $40? A net of $-21 for a single transaction between retail to employee and back to retail."
if GS(gamestop) pays you 50 and gets that 50 back in sales it pays no corporate income tax. your forgetting that wages are a deduction so its net income would be zero.
now there would be personal income tax on the 50 that you made say that 8 dollars, but that 8 dollars doesnt disappear. it pays for alot of social programs where many are targetted to the lowest income groups.
now regarding your argument that globalization is bad or the "devil". I will admit that yes alot of factory or blue collared workers in the USA did get the shaft when alot of jobs went to china, etc. but we also saw a large increase in our standard of living. This is what happens when a nation goes from a manufacturing base to knowledge base. Those displaced factory workers need to get new skills to get new jobs.
about your lost $$$ from taxes,etc....anything going to taxes arent lost as i mentioned earlier they go to the government and become part of government spending. So our GDP is made up of private /government sectors. (investments for each are included in each part) the only real loss is from inflation which is why its soo important to invest so you can stay ahead of inflation, but you need to remember that every year you get paid with that days dollar which includes prior inflation. now yes you need raises to really stay ahead of the game, but for most thats not a problem.
so overall as others have mentioned yes they are flaws and distortions, but globalization is good for everyone and yes sweatshops suck but with the political pressures i dont think they are as abundant as before.
about the taxes less taxes can be better see supply side economics, but as with any economic/political discussion there are two sides to the coin and usually your own personal biases come into play.
On January 28 2010 05:12 StorkHwaiting wrote: What? I did propose a solution, albeit an aspirational one rather than a detailed economic proposal. It's the same one as Sarkozy. The philosophies of capitalism need to be reformed with a moral purpose in mind, rather than relying on puritanical Capitalist ideology.
And just to be clear: if Americans didn't think less taxes/regulation = increased economic prosperity, the Republican party would lose every single election.
This is the rhetoric that has been espoused in America for the last 30 years. This is the economic philosophy the WORLD has been operating on for the last 30 years. Don't tell me some crap like "this isn't edgy or provocative." If it wasn't provocative, then why was the entire world marching to this beat for decades? And why did it take a massive slap to the face like this last recession to make people wake up and smell the coffee?
Just because I'm posting it now doesn't mean I didn't hold the same view ten years ago. I don't give a shit about being edgy. That was just Heyoka's queer little insult he felt needed to be expressed. It's the fact that this recession was such an epic vindication of my positions (and of many other minority economic thinkers). It is a great thing to see that the world leaders are FINALLY starting to see the light. This view has been the MINORITY for a long time. And I'm amazed you think it hasn't been the minority view.
The crux of the argument still lies in people making the "right" decision. Suddenly thinking, oh, well we'll make the right decision this time, doesn't quite cut it because seldom is there a clear cut correct answer that somehow lands due north so everybody's moral compass points to it.
Republicans would lose every single election if people actually voted on what was best for them or what they believed. Voting has little to do with actual needs, but instead with what basically becomes tradition passed on down families to the younger generation. And switching parties? Please, that's admitting you've had the wrong view point for the past X number of years. People would rather ignore what is best for them just to not be on the losing side of things.
I'd have to disagree. Because the guiding philosophy for the past 30 years is that things will naturally take care of themselves. This ideal of laissez faire.
Now, they're being forced to take a step back, reevaluate, and realize that no, laissez faire and letting things take the "natural" course is not the right way. Rather, things will need to be guided and more strictly regulated to create the outcomes that are needed.
To use an Eastern example, it's the difference between Confucianism and Taoism. It is a fundamental difference between the two and it most certainly does not have the same foundation of "people making the right decision."
Taoism espouses that there is a natural "Way," and that if everything is in tune with that Way it leads to harmony for all. This is very VERY similar to the concept of laissez faire, market forces, and natural equilibrium. Sometimes I wonder if the original theorists of these concepts drew their inspiration from Lao Zi.
Confucianism, on the other hand, says that systems must be created that create the good effects we want to see, and it is in the perfection of these systems and roles of people that harmony can be found.
There is a HUGE difference between the two, to the point that the philosophies are virtually antagonistic. And this is the entire crux of the debate going on right now. Is the "free" and "natural" order of things most beneficial, or should we be focusing on creating systems that are best at guiding and creating the growth/equality that we think is morally righteous for the people.
This is what is meant by "reinventing capitalism so that these original principles are the means and not the ends." We need to reinvent these theories and implement systems so that they serve what we want as a society, rather than just letting nature take its course.
However global prosperity and living standarts have improved a lot over the last 30 years thanks to globalization.
How do you know they're because of globalization instead of far more powerful forces, like the green revolution or a vast number of technological advances?
because it is globalization that brings technological advances and know-how to 3rd world countries.
No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
So your entire argument is that the system is unsustainable because corporations are greedy and take out more than is put into the "system." First of all, the only thing you've demonstrated is that the US government, which is not a capitalist enterprise, last time I checked, takes out money that isn't put back in. So your entire argument that it's the corporations fault is based off of the US government taking money out through taxes.
You can use the taxes as a substitute for any form of externality, or any form of non transactional cost. Even the material upkeep of the store would break the cycle. The point is there's no wealth being created in the cycle, but there's a transactional cost regardless.
However global prosperity and living standarts have improved a lot over the last 30 years thanks to globalization.
How do you know they're because of globalization instead of far more powerful forces, like the green revolution or a vast number of technological advances?
because it is globalization that brings technological advances and know-how to 3rd world countries.
No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
L is correct here. I would consider globalization to have started even in the 19th century, however.
On January 28 2010 05:29 travis wrote: caller ur mean
sorry
i tend to get a little bit irritated when people insult the field that i'm passionate about as being full of lies without any evidence at all to back it up.
On January 28 2010 05:26 Tower82 wrote: Hey I just want to point out some flaws in your statements.
"Then Gamestop gets their $50 and has to pay corporate tax on it. So they're down to what? $40? A net of $-21 for a single transaction between retail to employee and back to retail."
if GS(gamestop) pays you 50 and gets that 50 back in sales it pays no corporate income tax. your forgetting that wages are a deduction so its net income would be zero.
now there would be personal income tax on the 50 that you made say that 8 dollars, but that 8 dollars doesnt disappear. it pays for alot of social programs where many are targetted to the lowest income groups.
now regarding your argument that globalization is bad or the "devil". I will admit that yes alot of factory or blue collared workers in the USA did get the shaft when alot of jobs went to china, etc. but we also saw a large increase in our standard of living. This is what happens when a nation goes from a manufacturing base to knowledge base. Those displaced factory workers need to get new skills to get new jobs.
about your lost $$$ from taxes,etc....anything going to taxes arent lost as i mentioned earlier they go to the government and become part of government spending. So our GDP is made up of private /government sectors. (investments for each are included in each part) the only real loss is from inflation which is why its soo important to invest so you can stay ahead of inflation, but you need to remember that every year you get paid with that days dollar which includes prior inflation. now yes you need raises to really stay ahead of the game, but for most thats not a problem.
so overall as others have mentioned yes they are flaws and distortions, but globalization is good for everyone and yes sweatshops suck but with the political pressures i dont think they are as abundant as before.
about the taxes less taxes can be better see supply side economics, but as with any economic/political discussion there are two sides to the coin and usually your own personal biases come into play.
1. Those $8 go to cruise missiles blowing up rocks in Afghanistan too. A lot more of those $8 go to that than ever go into any welfare program. A lot more of those $8 go to Lockheed Martin execs to buy ferraris or to building oil refineries in Iraq. None of this money is going back to the people. Go take a look at government spending and where the money flows. It's not back to the people. There's a reason social security is bankrupt.
2. You ignored my point that only a small portion of the US labor market is capable of meeting the intellectual demands of the high-skill labor force. The majority are not smart enough.
3. Actually wages increases ARE a problem. Wages have not increased over the last 30 years. They've remained stagnant while the cost of living has gone up. It's a major issue in US economics. Also, examine the factors of inflation, and why the majority of America has absolutely no ability to control the rate of inflation.
However global prosperity and living standarts have improved a lot over the last 30 years thanks to globalization.
How do you know they're because of globalization instead of far more powerful forces, like the green revolution or a vast number of technological advances?
because it is globalization that brings technological advances and know-how to 3rd world countries.
No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
So your entire argument is that the system is unsustainable because corporations are greedy and take out more than is put into the "system." First of all, the only thing you've demonstrated is that the US government, which is not a capitalist enterprise, last time I checked, takes out money that isn't put back in. So your entire argument that it's the corporations fault is based off of the US government taking money out through taxes.
You can use the taxes as a substitute for any form of externality, or any form of non transactional cost. Even the material upkeep of the store would break the cycle. The point is there's no wealth being created in the cycle, but there's a transactional cost regardless.
While this is true, L, his entire argument mentions nothing of externality, nor does it mention something about transactional costs either. It simply talks about taxes.
If you're insisting that transactional costs are a flaw, though, then by that argument no market system can ever be good because your outputs will never be 100% from your inputs. It's like the idea of a Carnot engine in chemistry-you will never have 100% efficiency with your heat engines because of the second law of thermodynamics and how entropy works. The transactional cost represents the difference of inputs to outputs.
I also like it when the OP proceeds to ignore my post and go to the next one.
Now, the way I see it, what's currently taught in economics and finance classes in America is this concept of globalization, free market, capitalism, and less taxes/regulation = increased economic prosperity.
I want to go ahead and say that's crap.
First, one of the central tenets of modern capitalism is this concept that the "free" market leads to benefit for everyone. They think that things naturally move to an equilibrium in demand/supply/price if left alone. The rationale for this is that people, with enough info, are perfectly rational beings that make the best choices.
The problem with this theory is it doesn't account for the destructiveness of monopolies. In business, anytime a group has either grown or merged into a large enough economic body, they can start to implement destructive strategies like dumping a ton of their products at a very cheap price onto a foreign market and wrecking the local competition. This is validated by capitalism and the free market because this is merely a strategy to increase market share, and if they have the resources to engage in such an act, then they have every right to.
Over the span of a few years, this group demolishes the local competition and creates a monopoly. Then they jack up the prices a ton and win back all the profits they gave up with this strategy. Except once they've recouped their investment, they continue to do it perpetually. This is a win-lose scenario. Yet, it's an example of what happens on the "free" market. This doesn't lead to constant competition and cheaper prices/higher quality for everyone. This leads to a stagnant market where one giant is in control and sells at exorbitant prices because they are the controllers of all supply.
In capitalism, it's theorized that the only way to combat this is for another giant group to emerge. Yet, this sort of competition doesn't help at all. While the two giants are growing, they experience economies of scale and their efficiency increases. Yet, once they reach a certain size, they start to experience the DISeconomies of scale from being too bloated. But they have to continue this arms race, because if they try to scale back, the other one will have the advantage in buying power for that short window of time and can steal more market share, thus perpetuating an advantage until the guy who stepped back first is destroyed.
This creates an effect where giants are constantly forced to grow bigger to compete, even though in the long run it leads to a net loss in efficiency. This is what the free market creates.
The problems with this are obvious. This is why countries have effected protectionist policies to defend against these sorts of aggressive economic strategies. Then you no longer have a free market. It becomes mixed. Our world is full of mixed economies.
The last 30 years of economics in the USA and the world, is a constant attempt to try to bring down these protectionist strategies on the belief that free market was more efficient and beneficial for all. Peep the giant economic collapse we just had. It's pretty obvious to everyone now that this free market liberalization was a horrible idea. It destroyed local industries, it gutted nations, it destroyed whole swathes of industry in nations, and all it really did was lower the retail prices of goods.
What use are lower prices when you don't have a job?
That's the problem with the concept of free market. It's too focused on price of goods as a barometer for efficiency. It fails to address the issues of labor and wages. Now if you try to approach the labor market using capitalist and free market principles, you end up with sweatshops in China and India.
Does anyone honestly think it is a good thing to compete with sweatshop workers in terms of pay/productivity?
There is only one real way to improve labor's market value, which is training that improves their productivity. Yet, the sad truth of the matter is that even with a great education, a large proportion of the population is not that clever. They can't really be trained that far past the level of a sweatshop worker. This is what's traditionally known as "retail sector" or "blue collar."
This makes up a pretty large percentage of the world population. Yet, the blue collar workers in America don't want to work in sweat shop conditions. Capitalism and the free market tells us that the smart thing to do is just tell those blue collar workers to fuck off and move the factories to China.
This is why you see an increasing wealth disparity between the rich and poor in America. The poor have lost their jobs to the increasingly "free" labor market, whereas the rich and intelligent Americans have increased their value because they have some of the world's best education, coupled with some of the world's best tools of production.
AKA, the American factory worker must compete with the Chinese sweat shop worker.
The American Harvard graduate competes with the Chinese Beijing University graduate. Except the Harvard graduate gets to enter an organization like Goldman Sachs, with some of the world's best financial algorithms and the best financing and the best connections.
Therefore, while the free market has allowed the Harvard graduate to reach greater and greater heights by reaching the pinnacle of the financial world and reaping the benefits of competing vs the world due to massive, built-in advantages, the American factory worker has been laid off and can't find another job because he/she is now competing versus the 5 billion people of the developing world.
Do you guys see now why the free market is not helping the vast majority of America?
And if you look at the labor markets, the greatest shift has been away from manufacturing and towards retail. Yet it's a nonsensical shift. How does it make any sense when the retail industry is driven by consumption, and the consumption is paid for by wages from the retail industry?
This is like saying, I get a job at Gamestop. Then I buy a ton of games from Gamestop. Eventually, Gamestop will expand because I'm buying so many games with my wages from them, that Gamestop's sales will be enough to expand.
It makes no sense. Money is constantly being pulled OUT of the economy this way. Every time you put $50 through the system, you end up with less. First, I get the job at Gamestop. They pay me $50. Yet, I pay income tax on that $50. It then becomes $42.
This $42 is then spent to buy a game. Yet I need to supplement it with another $8 from somewhere. So, already I'm at -$8. Okay, $50 + tax = $53. Now I'm at -$11.
Then Gamestop gets their $50 and has to pay corporate tax on it. So they're down to what? $40? A net of $-21 for a single transaction between retail to employee and back to retail.
So, in every transaction of $50 of wages going out of the system, we end up with only $29 of it going back in. It's rather obvious that the US labor/wage market can not be sustained by this type of relationship.
The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.
The reason is because the tax dollars are being siphoned off. That $21 that was taken out is given to the government. Yet, the government we have today is increasingly controlled by corporations. According to current moral and economic philosophy, like that espoused by Jibba and others on TL, it's perfectly okay and constitutional for a corporation to get involved with government. On top of that, morals have no place in economic decisions. Therefore, it is completely okay for a corporation to try to pay to get laws passed that benefit the corporation.
What this means is that those $21 instead of going back into an industry that benefits the lower classes could be funneled into an industry that doesn't support hardly any of the middle-lower classes. Such as the banking industry! So, not only is the middle class losing jobs, competing with a vast number of foreign competitors, but they lose nearly half of every dollar to that mfing Harvard graduate. Because he/she is busy wheeling and dealing, screwed a bunch of people over with greedy "capitalist" ploys, and then needed a bailout.
This is how Main Street gets shafted.
On top of that, to the people who claim that of course the solution to all this is just get rid of taxes, I ask the question, ok, then where is the growth?
Sure, without taxes the $50 between me and Gamestop is cycled back and forth. Yet, that $50 will never grow. It remains $50. Therefore, even in the most ideal of circumstances, the money is not lost, it only remains the SAME. ZERO growth.
In fact, accounting for inflation, you'd still see a loss of $1-2 each year. The industry continues to lose in a perfectly ideal situation. This is why the concept of consumer-based society leading to growth is total bullshit. You cannot grow an economy by spending money. That doesn't work.
The only way to grow the economic pie is technological innovation which decreases the cost of production. This way, I spend $50, Gamestop gets their $50 back. Yet, they have factories/studios that can produce the game for only $5. Therefore, they pay me $50, I buy from them for $50, they get back $45. They can then afford to make 9 more games. With 9 more games, they can make enough money back to hire 8 more workers. This way the loop continues.
Except somewhere in the loop, the business decides that instead, they're just going to pay all those profits to the CEO. We don't need to increase that many jobs. We'll just give it to the top guys. Therefore, once again the middle and lower classes are powerless to stop the flight of money from the consumer-supplier loop.
In pretty much every way, using capitalist and free market principles leads to a loss for the middle and lower classes. This is why Sarkozy says capitalism needs to be refounded to be more moral. That finance, free trade, and competition are a MEANS not an end. And it needs to be redefined and reinvented.
It's because morons run around trying to claim that the free market leads to increased efficiency and prosperity for all as long as everyone just makes decisions in a totally selfish manner. It doesn't. It doesn't work. The past 30 years have shown it doesn't work. It's led to disaster. The globalization and free market proponents were wrong. They did nothing but justify selfishness as a good thing.
[citation needed] free market doesn't mean unregulated. and your gamestop example is beyond terrible. you make so many presumptions that are completely untrue it's unbelievable.
On January 28 2010 05:28 L wrote: No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
If you read my post again you will notice that I spoke about technological advances and know-how not the green revolution. Some people might spend money to educate people in 3rd world countries just because they are awesome persons, but corporations that operate factories also have to educate and bring know-how to their personnel in order to function properly.
However global prosperity and living standarts have improved a lot over the last 30 years thanks to globalization.
How do you know they're because of globalization instead of far more powerful forces, like the green revolution or a vast number of technological advances?
because it is globalization that brings technological advances and know-how to 3rd world countries.
No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
So your entire argument is that the system is unsustainable because corporations are greedy and take out more than is put into the "system." First of all, the only thing you've demonstrated is that the US government, which is not a capitalist enterprise, last time I checked, takes out money that isn't put back in. So your entire argument that it's the corporations fault is based off of the US government taking money out through taxes.
You can use the taxes as a substitute for any form of externality, or any form of non transactional cost. Even the material upkeep of the store would break the cycle. The point is there's no wealth being created in the cycle, but there's a transactional cost regardless.
While this is true, L, his entire argument mentions nothing of externality, nor does it mention something about transactional costs either. It simply talks about taxes.
If you're insisting that transactional costs are a flaw, though, then by that argument no market system can ever be good because your outputs will never be 100% from your inputs. It's like the idea of a Carnot engine in chemistry-you will never have 100% efficiency with your heat engines because of the second law of thermodynamics and how entropy works. The transactional cost represents the difference of inputs to outputs.
I also like it when the OP proceeds to ignore my post and go to the next one.
That's not really true, because even if you don't have 100% efficiency, you can always have something other than a closed system; if you create wealth, then it can be destroyed by inefficiencies, but the onus would be on creating more wealth. If we take manufacturing to be the prototypical example of a clear value added process, we can see that MAKING STUFF GIVES YOU MONEY. If, however, the only thing you do is cyclically trade around retail goods, you simply run out over time.
The idea behind his statement is that the near complete collapse of manufacturing has stopped the input of wealth into the system, which is now spinning around in service industries being shaved down slowly.
On January 28 2010 05:28 L wrote: No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
If you read my post again you will notice that I spoke about technological advances and know-how not the green revolution. Some people might spend money to educate people in 3rd world countries just because they are awesome persons, but corporations that operate factories also have to educate and bring know-how to their personnel in order to function properly.
The green revolution is the largest example of a sharing of technological advances and know-how. It occured pre globalization and has probably saved billions from starvation.
You need to do more than say that globalization has existed while the standard of living has increased. You need to isolate globalization.
There are a lot of good books by Chomsky on this topic, where he clearly displays the abuse of power by corporations in the United States, as well as their affiliation with government entities. If you want a good documentary for sourcing, I strongly recommend 'Manufacturing Consent'.
Edit: I skimmed a few of the posts very briefly, and it seems the arguments are economically driven. I think the arguments should be morally driven, since a system that devalues life is inherently wrong (for obvious moral reasons).
However global prosperity and living standarts have improved a lot over the last 30 years thanks to globalization.
How do you know they're because of globalization instead of far more powerful forces, like the green revolution or a vast number of technological advances?
because it is globalization that brings technological advances and know-how to 3rd world countries.
No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
So your entire argument is that the system is unsustainable because corporations are greedy and take out more than is put into the "system." First of all, the only thing you've demonstrated is that the US government, which is not a capitalist enterprise, last time I checked, takes out money that isn't put back in. So your entire argument that it's the corporations fault is based off of the US government taking money out through taxes.
You can use the taxes as a substitute for any form of externality, or any form of non transactional cost. Even the material upkeep of the store would break the cycle. The point is there's no wealth being created in the cycle, but there's a transactional cost regardless.
While this is true, L, his entire argument mentions nothing of externality, nor does it mention something about transactional costs either. It simply talks about taxes.
If you're insisting that transactional costs are a flaw, though, then by that argument no market system can ever be good because your outputs will never be 100% from your inputs. It's like the idea of a Carnot engine in chemistry-you will never have 100% efficiency with your heat engines because of the second law of thermodynamics and how entropy works. The transactional cost represents the difference of inputs to outputs.
I also like it when the OP proceeds to ignore my post and go to the next one.
That's not really true, because even if you don't have 100% efficiency, you can always have something other than a closed system; if you create wealth, then it can be destroyed by inefficiencies, but the onus would be on creating more wealth. If we take manufacturing to be the prototypical example of a clear value added process, we can see that MAKING STUFF GIVES YOU MONEY. If, however, the only thing you do is cyclically trade around retail goods, you simply run out over time.
The idea behind his statement is that the near complete collapse of manufacturing has stopped the input of wealth into the system, which is now spinning around in service industries being shaved down slowly.
This would certainly be the case if we looked at just the United States. But you have to look at the world as a whole, not just one country. If wealth were to be shaved down because the only industries in a country would be service industries, then several small countries would likely have collapsed economically by now.
We should probably ask the question "what is wealth?" before we can get into this sort of argument. My argument is that wealth is how much someone values something, and tends to be subjective for an individual but objective for the aggregate. Therefore, one could argue that the services that are provided to people through service industries are providing "intangible, illiquid" wealth to people purchasing their services. So while they may not be getting any monetary benefit from acquiring it, they are still spending the money to gain utility-but I digress regarding utility.
We could see a chain of money like this, however:
raw resources --> manufacturing--> distribution
each of these need money for their work, which they can acquire through loans or equity. This comes from financial institutions. To support these financial institutions are other institutions, and profit from all these companies goes to financial institutions so they can loan out more money, etc.
This is a very flimsy representation and is probably full of holes but I'm operating on two hours of sleep so my argumentation style is pretty crappy today.
Now, the way I see it, what's currently taught in economics and finance classes in America is this concept of globalization, free market, capitalism, and less taxes/regulation = increased economic prosperity.
I want to go ahead and say that's crap.
First, one of the central tenets of modern capitalism is this concept that the "free" market leads to benefit for everyone. They think that things naturally move to an equilibrium in demand/supply/price if left alone. The rationale for this is that people, with enough info, are perfectly rational beings that make the best choices.
I read this and already realized that you have no idea what you're talking about when it comes to economics.
For an example, consider your little Gamestop analogy:
This is like saying, I get a job at Gamestop. Then I buy a ton of games from Gamestop. Eventually, Gamestop will expand because I'm buying so many games with my wages from them, that Gamestop's sales will be enough to expand.
It makes no sense. Money is constantly being pulled OUT of the economy this way. Every time you put $50 through the system, you end up with less. First, I get the job at Gamestop. They pay me $50. Yet, I pay income tax on that $50. It then becomes $42.
This $42 is then spent to buy a game. Yet I need to supplement it with another $8 from somewhere. So, already I'm at -$8. Okay, $50 + tax = $53. Now I'm at -$11.
Then Gamestop gets their $50 and has to pay corporate tax on it. So they're down to what? $40? A net of $-21 for a single transaction between retail to employee and back to retail.
So, in every transaction of $50 of wages going out of the system, we end up with only $29 of it going back in. It's rather obvious that the US labor/wage market can not be sustained by this type of relationship.
So your entire argument is that the system is unsustainable because corporations are greedy and take out more than is put into the "system." First of all, the only thing you've demonstrated is that the US government, which is not a capitalist enterprise, last time I checked, takes out money that isn't put back in. So your entire argument that it's the corporations fault is based off of the US government taking money out through taxes.
You then to proceed to reveal your ignorance of complaining about "input" and "output" in the system by saying:
What this means is that those $21 instead of going back into an industry that benefits the lower classes could be funneled into an industry that doesn't support hardly any of the middle-lower classes. Such as the banking industry! So, not only is the middle class losing jobs, competing with a vast number of foreign competitors, but they lose nearly half of every dollar to that mfing Harvard graduate. Because he/she is busy wheeling and dealing, screwed a bunch of people over with greedy "capitalist" ploys, and then needed a bailout.
All I read here is: I don't understand why the bailout was key to preventing an across-the-board slash in all market sectors by at least 50%, but I will use popular imagery and combine it with a few numbers and classic "human" arguments and use it to justify my view on economics.
You then complain about all the so called "free-market fundamentalists" and how they are destroying the world by breaking the balance between markets and government and how deregulation is causing all these problems. But then you mention how the reason that "monopolists are such a powerful force in 'free markets'" because they can use law against the other companies to drive them out of business, when in reality that is the primary flaw of having a mixed market. That is why people want deregulation-so larger companies can't use laws to fuck over smaller competitors.
Now we do see companies today gradually consolidating over and over again. This is an example of the idea of economies of scale. But then you make the argument that they are growing so big that they are now in diseconomies of scale. So isn't it patently obvious that these sorts of companies are probably going to be driven out of business by another company that doesn't have such a diseconomy?
Instead of concentrating on popular views and very general ideas, I would focus on the more obvious problems with the free market. For instance, the idea of asymmetric information, which causes market failure, as well as what we call externalities. These are all very key ideas in the teaching of economics which you just gloss over as being free-market fundamentalists. Those are very valid arguments as to why we need to "change" capitalism. They certainly are better than the pop-crap, contradictions, and blatant generalizations that your entire argument revolves around.
No. You've made probably the most wrong-footed analysis possible. You're welcome to go back and look at my post history. I've stated several times the factors leading to the bailout and why it was necessary.
Nothing I've said is pop-crap. You just like to brand it as such because you find any philosophy that wants to help Main street to be "populist propaganda." You see how easy it is to label people and throw out generic insults?
Now to your actual points.
1. I never said they use government to drive out competition. Wtf are you talking about?
2. There is no such thing as a balance between markets and government. Again, wtf are you talking about? I never said anything remotely like your twisted interpretation.
3. What I said was that with the recent laws, corporations are able to influence the very watchdog that is supposed to regulate them.
4. All I've read from you is that you lack reading comprehension. A corporation gets large enough to suffer diseconomies of scale, but the way the "free market" is structured, they can overcome this with buying power to allow destructive practices like price wars to take down the competition before the more efficient little guy can expand enough to actually compete.
Please put the e-peen away. I assure you my understanding of economics is more than sufficient. Just because I boil something down to a simpler process for the sake of discourse doesn't mean I am not aware of the nuances.
Further, your concept of asymmetric information is so old and tired and irrelevant that it's just boring to debate at this point. You can give two people the same information and they won't even interpret it the same way. ie your reading comprehension skills. There will never be a way to guarantee perfect information for a consumer market. Especially not when there's a marketing industry around, whose sole purpose has become warping the perception of value consumers have about a product. This is an outgrowth of free market principles. Do whatever is effective in gaining sales.
Externalities are impossible to quantify. GL waiting on a way to compute butterfly effect with any kind of accuracy and in a quantifiable way that can be taxed or assessed in a business transaction. I think you're the one showing a lack of understanding in economics because the two points you brought up are pipe dreams rather than anything worth debating.
We might as well start debating the merits of Communism, if only we could find a way to change human nature. Assessing externalities and creating an environment of perfect information are those kinds of ideals.
However global prosperity and living standarts have improved a lot over the last 30 years thanks to globalization.
How do you know they're because of globalization instead of far more powerful forces, like the green revolution or a vast number of technological advances?
because it is globalization that brings technological advances and know-how to 3rd world countries.
No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
So your entire argument is that the system is unsustainable because corporations are greedy and take out more than is put into the "system." First of all, the only thing you've demonstrated is that the US government, which is not a capitalist enterprise, last time I checked, takes out money that isn't put back in. So your entire argument that it's the corporations fault is based off of the US government taking money out through taxes.
You can use the taxes as a substitute for any form of externality, or any form of non transactional cost. Even the material upkeep of the store would break the cycle. The point is there's no wealth being created in the cycle, but there's a transactional cost regardless.
While this is true, L, his entire argument mentions nothing of externality, nor does it mention something about transactional costs either. It simply talks about taxes.
If you're insisting that transactional costs are a flaw, though, then by that argument no market system can ever be good because your outputs will never be 100% from your inputs. It's like the idea of a Carnot engine in chemistry-you will never have 100% efficiency with your heat engines because of the second law of thermodynamics and how entropy works. The transactional cost represents the difference of inputs to outputs.
I also like it when the OP proceeds to ignore my post and go to the next one.
That's not really true, because even if you don't have 100% efficiency, you can always have something other than a closed system; if you create wealth, then it can be destroyed by inefficiencies, but the onus would be on creating more wealth. If we take manufacturing to be the prototypical example of a clear value added process, we can see that MAKING STUFF GIVES YOU MONEY. If, however, the only thing you do is cyclically trade around retail goods, you simply run out over time.
The idea behind his statement is that the near complete collapse of manufacturing has stopped the input of wealth into the system, which is now spinning around in service industries being shaved down slowly.
On January 28 2010 05:28 L wrote: No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
If you read my post again you will notice that I spoke about technological advances and know-how not the green revolution. Some people might spend money to educate people in 3rd world countries just because they are awesome persons, but corporations that operate factories also have to educate and bring know-how to their personnel in order to function properly.
The green revolution is the largest example of a sharing of technological advances and know-how. It occured pre globalization and has probably saved billions from starvation.
You need to do more than say that globalization has existed while the standard of living has increased. You need to isolate globalization.
Yup ,100% L. Thank you for communicating that more eloquently than I did. The point of my Gamestop analogy was not to show off the precise mechanics of economics, it was merely to illustrate in a very simple way for people NOT acquainted with economics, that the value-added process has been destroyed in America.
On January 28 2010 05:12 StorkHwaiting wrote: What? I did propose a solution, albeit an aspirational one rather than a detailed economic proposal. It's the same one as Sarkozy. The philosophies of capitalism need to be reformed with a moral purpose in mind, rather than relying on puritanical Capitalist ideology.
And just to be clear: if Americans didn't think less taxes/regulation = increased economic prosperity, the Republican party would lose every single election.
This is the rhetoric that has been espoused in America for the last 30 years. This is the economic philosophy the WORLD has been operating on for the last 30 years. Don't tell me some crap like "this isn't edgy or provocative." If it wasn't provocative, then why was the entire world marching to this beat for decades? And why did it take a massive slap to the face like this last recession to make people wake up and smell the coffee?
Just because I'm posting it now doesn't mean I didn't hold the same view ten years ago. I don't give a shit about being edgy. That was just Heyoka's queer little insult he felt needed to be expressed. It's the fact that this recession was such an epic vindication of my positions (and of many other minority economic thinkers). It is a great thing to see that the world leaders are FINALLY starting to see the light. This view has been the MINORITY for a long time. And I'm amazed you think it hasn't been the minority view.
The crux of the argument still lies in people making the "right" decision. Suddenly thinking, oh, well we'll make the right decision this time, doesn't quite cut it because seldom is there a clear cut correct answer that somehow lands due north so everybody's moral compass points to it.
Republicans would lose every single election if people actually voted on what was best for them or what they believed. Voting has little to do with actual needs, but instead with what basically becomes tradition passed on down families to the younger generation. And switching parties? Please, that's admitting you've had the wrong view point for the past X number of years. People would rather ignore what is best for them just to not be on the losing side of things.
I'd have to disagree. Because the guiding philosophy for the past 30 years is that things will naturally take care of themselves. This ideal of laissez faire.
Now, they're being forced to take a step back, reevaluate, and realize that no, laissez faire and letting things take the "natural" course is not the right way. Rather, things will need to be guided and more strictly regulated to create the outcomes that are needed.
To use an Eastern example, it's the difference between Confucianism and Taoism. It is a fundamental difference between the two and it most certainly does not have the same foundation of "people making the right decision."
Taoism espouses that there is a natural "Way," and that if everything is in tune with that Way it leads to harmony for all. This is very VERY similar to the concept of laissez faire, market forces, and natural equilibrium. Sometimes I wonder if the original theorists of these concepts drew their inspiration from Lao Zi.
Confucianism, on the other hand, says that systems must be created that create the good effects we want to see, and it is in the perfection of these systems and roles of people that harmony can be found.
There is a HUGE difference between the two, to the point that the philosophies are virtually antagonistic. And this is the entire crux of the debate going on right now. Is the "free" and "natural" order of things most beneficial, or should we be focusing on creating systems that are best at guiding and creating the growth/equality that we think is morally righteous for the people.
This is what is meant by "reinventing capitalism so that these original principles are the means and not the ends." We need to reinvent these theories and implement systems so that they serve what we want as a society, rather than just letting nature take its course.
We are not having a free market, not the US, not in Europe, not in Asia, not anywhere! The market is heavily regulated everywhere, trying to say anything else just reeks of ignorance. That was my point. And no matter how much money a company is giving to the parties if it turns out that the party will help empowering this company to disproportional degrees the people wont tolerate it and will shoot them down the next election. And it isn't even plausible for it to happen, since the parties know that if they go too far out of line in terms of this they will for sure lose the next election, so they don't since it wouldn't be helping their self interest to do so.
And no, money is not winning the elections. What wins elections is support from the people, the more support the party have the more money they will get. Or, in this case correlation do most likely not mean causation since we have a very strong rational argument why popular support and financial support should correlate.
And about the current "crisis", is anyone starving in any of the western countries? Do anyone lack the money to buy clothes? No, not really, what gets put on hold is something like a new plasma TV, mostly just forcing people to consume a bit less luxury wares than they usually do.
OP, have you ever lived outside of the US? How about outside of the "West"?
What interests me is that I have never seen you make a specific post in your entire time at TL. You make blanket declarative statements, without every providing evidence. You're a nice essayist, but why don't you show us something besides your opinion?
I honestly think that all this discussion is complete bullshit.
"Capitalism is good" is not the sole reason why we have money, we have it because its the best way to give value to work we ever invented.
And even if your system is not a free market (and really few places are true free markets, like somalia) you can still have capital, a stock market, and make use of all economic know how that exists to better improve the lifes of everyone.
As was said before, the problem isnt money or globalization or corporations, its people behind them, and since we cant just trust that the top guys making the decisions that are capable of fucking up billions of people we need to have some for of regulation/accountability so that abuses dont happen.
Then again, people realized to late that corporations can actually be selfish motherfuckers and now they have bought all the politicians they need to keep fucking us in the ass.
In conclusion, money is good, creating business, investing in stocks, its all not only good, its essential for a country to thrive nowdays, but theres a correct way to do it and so far, there arent many doing it the right way.
However global prosperity and living standarts have improved a lot over the last 30 years thanks to globalization.
How do you know they're because of globalization instead of far more powerful forces, like the green revolution or a vast number of technological advances?
because it is globalization that brings technological advances and know-how to 3rd world countries.
No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
So your entire argument is that the system is unsustainable because corporations are greedy and take out more than is put into the "system." First of all, the only thing you've demonstrated is that the US government, which is not a capitalist enterprise, last time I checked, takes out money that isn't put back in. So your entire argument that it's the corporations fault is based off of the US government taking money out through taxes.
You can use the taxes as a substitute for any form of externality, or any form of non transactional cost. Even the material upkeep of the store would break the cycle. The point is there's no wealth being created in the cycle, but there's a transactional cost regardless.
While this is true, L, his entire argument mentions nothing of externality, nor does it mention something about transactional costs either. It simply talks about taxes.
If you're insisting that transactional costs are a flaw, though, then by that argument no market system can ever be good because your outputs will never be 100% from your inputs. It's like the idea of a Carnot engine in chemistry-you will never have 100% efficiency with your heat engines because of the second law of thermodynamics and how entropy works. The transactional cost represents the difference of inputs to outputs.
I also like it when the OP proceeds to ignore my post and go to the next one.
That's not really true, because even if you don't have 100% efficiency, you can always have something other than a closed system; if you create wealth, then it can be destroyed by inefficiencies, but the onus would be on creating more wealth. If we take manufacturing to be the prototypical example of a clear value added process, we can see that MAKING STUFF GIVES YOU MONEY. If, however, the only thing you do is cyclically trade around retail goods, you simply run out over time.
The idea behind his statement is that the near complete collapse of manufacturing has stopped the input of wealth into the system, which is now spinning around in service industries being shaved down slowly.
This would certainly be the case if we looked at just the United States. But you have to look at the world as a whole, not just one country. If wealth were to be shaved down because the only industries in a country would be service industries, then several small countries would likely have collapsed economically by now.
We should probably ask the question "what is wealth?" before we can get into this sort of argument. My argument is that wealth is how much someone values something, and tends to be subjective for an individual but objective for the aggregate. Therefore, one could argue that the services that are provided to people through service industries are providing "intangible, illiquid" wealth to people purchasing their services. So while they may not be getting any monetary benefit from acquiring it, they are still spending the money to gain utility-but I digress regarding utility.
We could see a chain of money like this, however:
raw resources --> manufacturing--> distribution
each of these need money for their work, which they can acquire through loans or equity. This comes from financial institutions. To support these financial institutions are other institutions, and profit from all these companies goes to financial institutions so they can loan out more money, etc.
This is a very flimsy representation and is probably full of holes but I'm operating on two hours of sleep so my argumentation style is pretty crappy today.
See, that's where I have a problem with how "wealth" is assessed in America today.
While there is a certain utility value in consumption, it's a very very small amount for what's paid.
That's why there is this stark delineation between consumption and investment. Investment is spending resources to improve one's ability to produce. Consumption is spending resources for the sake of pleasure.
While it can be argued that consumption in a way is just a cost of production because people need to be happy/content/healthy etc to produce, there is a limit to how much consumption is actually necessary. In today's material culture, consumerism has gotten way out of hand. People do not need 5 generations of Ipods in as many years.
On January 28 2010 05:56 Jibba wrote: OP, have you ever lived outside of the US? How about outside of the "West"?
What interests me is that I have never seen you make a specific post in your entire time at TL. You make blanket declarative statements, without every providing evidence. You're a nice essayist, but why don't you show us something besides your opinion?
Explain how this has any relevance and I'll give you an answer.
On January 28 2010 05:51 StorkHwaiting wrote: 3. What I said was that with the recent laws, corporations are able to influence the very watchdog that is supposed to regulate them.
How would the new law allow them to influence the politicians more than before? It is not about bribes, or are the parties allowed to give the money they get to individuals?
I mean, this is nothing like buying politicians, this whole deal is just about companies being allowed to contribute with ads.
On January 28 2010 05:59 StorkHwaiting wrote: While it can be argued that consumption in a way is just a cost of production because people need to be happy/content/healthy etc to produce, there is a limit to how much consumption is actually necessary. In today's material culture, consumerism has gotten way out of hand. People do not need 5 generations of Ipods in as many years.
So basically, you want us to produce more without anyone consuming it? What a hypocrite you are... With your logic we could just as well go 100 years back in time.
On January 28 2010 05:57 D10 wrote: I honestly think that all this discussion is complete bullshit.
"Capitalism is good" is not the sole reason why we have money, we have it because its the best way to give value to work we ever invented.
And even if your system is not a free market (and really few places are true free markets, like somalia) you can still have capital, a stock market, and make use of all economic know how that exists to better improve the lifes of everyone.
As was said before, the problem isnt money or globalization or corporations, its people behind them, and since we cant just trust that the top guys making the decisions that are capable of fucking up billions of people we need to have some for of regulation/accountability so that abuses dont happen.
Then again, people realized to late that corporations can actually be selfish motherfuckers and now they have bought all the politicians they need to keep fucking us in the ass.
In conclusion, money is good, creating business, investing in stocks, its all not only good, its essential for a country to thrive nowdays, but theres a correct way to do it and so far, there arent many doing it the right way.
D10 that's the crux of the debate here. Contemporary capitalist theory says that people doing whatever is in their own interest is GOOD for the economy. (Except doing what's in their own interest can often be labeled asshole behavior. Hence why selfish is considered an insult).
I am not advocating the destruction of currency, the stock market, or corporations. What I'm saying is that this concept of deregulation, laissez faire, and small government is a horrible idea. Exactly for the reasons you brought up. People and corporations need to regulated so they don't keep fucking us in the ass.
On January 28 2010 05:51 StorkHwaiting wrote: 3. What I said was that with the recent laws, corporations are able to influence the very watchdog that is supposed to regulate them.
How would the new law allow them to influence the politicians more than before? It is not about bribes, or are the parties allowed to give the money they get to individuals?
I mean, this is nothing like buying politicians, this whole deal is just about companies being allowed to contribute with ads.
Because if a corporation paid for the politician's campaign, the politician would then be indebted to them and would work hard to get laws passed that are favorable to the corporation? Are you really not understanding how corruption works? :-/
Now, the way I see it, what's currently taught in economics and finance classes in America is this concept of globalization, free market, capitalism, and less taxes/regulation = increased economic prosperity.
I want to go ahead and say that's crap.
First, one of the central tenets of modern capitalism is this concept that the "free" market leads to benefit for everyone. They think that things naturally move to an equilibrium in demand/supply/price if left alone. The rationale for this is that people, with enough info, are perfectly rational beings that make the best choices.
I read this and already realized that you have no idea what you're talking about when it comes to economics.
For an example, consider your little Gamestop analogy:
This is like saying, I get a job at Gamestop. Then I buy a ton of games from Gamestop. Eventually, Gamestop will expand because I'm buying so many games with my wages from them, that Gamestop's sales will be enough to expand.
It makes no sense. Money is constantly being pulled OUT of the economy this way. Every time you put $50 through the system, you end up with less. First, I get the job at Gamestop. They pay me $50. Yet, I pay income tax on that $50. It then becomes $42.
This $42 is then spent to buy a game. Yet I need to supplement it with another $8 from somewhere. So, already I'm at -$8. Okay, $50 + tax = $53. Now I'm at -$11.
Then Gamestop gets their $50 and has to pay corporate tax on it. So they're down to what? $40? A net of $-21 for a single transaction between retail to employee and back to retail.
So, in every transaction of $50 of wages going out of the system, we end up with only $29 of it going back in. It's rather obvious that the US labor/wage market can not be sustained by this type of relationship.
So your entire argument is that the system is unsustainable because corporations are greedy and take out more than is put into the "system." First of all, the only thing you've demonstrated is that the US government, which is not a capitalist enterprise, last time I checked, takes out money that isn't put back in. So your entire argument that it's the corporations fault is based off of the US government taking money out through taxes.
You then to proceed to reveal your ignorance of complaining about "input" and "output" in the system by saying:
What this means is that those $21 instead of going back into an industry that benefits the lower classes could be funneled into an industry that doesn't support hardly any of the middle-lower classes. Such as the banking industry! So, not only is the middle class losing jobs, competing with a vast number of foreign competitors, but they lose nearly half of every dollar to that mfing Harvard graduate. Because he/she is busy wheeling and dealing, screwed a bunch of people over with greedy "capitalist" ploys, and then needed a bailout.
All I read here is: I don't understand why the bailout was key to preventing an across-the-board slash in all market sectors by at least 50%, but I will use popular imagery and combine it with a few numbers and classic "human" arguments and use it to justify my view on economics.
You then complain about all the so called "free-market fundamentalists" and how they are destroying the world by breaking the balance between markets and government and how deregulation is causing all these problems. But then you mention how the reason that "monopolists are such a powerful force in 'free markets'" because they can use law against the other companies to drive them out of business, when in reality that is the primary flaw of having a mixed market. That is why people want deregulation-so larger companies can't use laws to fuck over smaller competitors.
Now we do see companies today gradually consolidating over and over again. This is an example of the idea of economies of scale. But then you make the argument that they are growing so big that they are now in diseconomies of scale. So isn't it patently obvious that these sorts of companies are probably going to be driven out of business by another company that doesn't have such a diseconomy?
Instead of concentrating on popular views and very general ideas, I would focus on the more obvious problems with the free market. For instance, the idea of asymmetric information, which causes market failure, as well as what we call externalities. These are all very key ideas in the teaching of economics which you just gloss over as being free-market fundamentalists. Those are very valid arguments as to why we need to "change" capitalism. They certainly are better than the pop-crap, contradictions, and blatant generalizations that your entire argument revolves around.
No. You've made probably the most wrong-footed analysis possible. You're welcome to go back and look at my post history. I've stated several times the factors leading to the bailout and why it was necessary.
Nothing I've said is pop-crap. You just like to brand it as such because you find any philosophy that wants to help Main street to be "populist propaganda." You see how easy it is to label people and throw out generic insults?
Now to your actual points.
1. I never said they use government to drive out competition. Wtf are you talking about?
2. There is no such thing as a balance between markets and government. Again, wtf are you talking about? I never said anything remotely like your twisted interpretation.
3. What I said was that with the recent laws, corporations are able to influence the very watchdog that is supposed to regulate them.
4. All I've read from you is that you lack reading comprehension. A corporation gets large enough to suffer diseconomies of scale, but the way the "free market" is structured, they can overcome this with buying power to allow destructive practices like price wars to take down the competition before the more efficient little guy can expand enough to actually compete.
Please put the e-peen away. I assure you my understanding of economics is more than sufficient. Just because I boil something down to a simpler process for the sake of discourse doesn't mean I am not aware of the nuances.
Further, your concept of asymmetric information is so old and tired and irrelevant that it's just boring to debate at this point. You can give two people the same information and they won't even interpret it the same way. ie your reading comprehension skills. There will never be a way to guarantee perfect information for a consumer market. Especially not when there's a marketing industry around, whose sole purpose has become warping the perception of value consumers have about a product. This is an outgrowth of free market principles. Do whatever is effective in gaining sales.
Externalities are impossible to quantify. GL waiting on a way to compute butterfly effect with any kind of accuracy and in a quantifiable way that can be taxed or assessed in a business transaction. I think you're the one showing a lack of understanding in economics because the two points you brought up are pipe dreams rather than anything worth debating.
We might as well start debating the merits of Communism, if only we could find a way to change human nature. Assessing externalities and creating an environment of perfect information are those kinds of ideals.
Oh dear lord.
First off, #1
On top of that, morals have no place in economic decisions. Therefore, it is completely okay for a corporation to try to pay to get laws passed that benefit the corporation.
Then, #2:
The problems with this are obvious. This is why countries have effected protectionist policies to defend against these sorts of aggressive economic strategies. Then you no longer have a free market. It becomes mixed. Our world is full of mixed economies.
The last 30 years of economics in the USA and the world, is a constant attempt to try to bring down these protectionist strategies on the belief that free market was more efficient and beneficial for all. Peep the giant economic collapse we just had. It's pretty obvious to everyone now that this free market liberalization was a horrible idea. It destroyed local industries, it gutted nations, it destroyed whole swathes of industry in nations, and all it really did was lower the retail prices of goods.
#3 I agree with your statement here, but I don't see why there would still be a watchdog if there's deregulation going on. If anything, deregulation would get rid of the watchdog, otherwise it's not deregulation, its corporate favoritism. I also didn't talk about this at all.
#4: Funny, because the only thing you mentioned was how big companies want to compete in each other in a bidding war. While they do tend to buy up smaller companies, it's not because they are trying to "outgrow" the other-it has more to do with trying to destroy competition. But think about it logically-assuming the industry doesn't have ludicriously high start-up costs, the big companies will be paying through the nose for things that aren't worth nearly as much as they are just so they can avoid competition. It's a cycle that will end-badly for these large companies-because they are paying more than what they are getting back. This cycle is certainly more solid than your Gamestop example of cyclical service markets not putting in more than they are taking out. A good example of this was GM, which basically bought more than it could chew, and compounded other problems together to create a financial struggle.
As for your views regarding asymmetric information and externalities, I wasn't making the argument that a free-market would get rid of these things. Far from it. My entire argument was based on the fact that markets do fail. And these two are main causes of it. And we should address the problems that are caused by this-for instance, in the case of asymmetric information in the insurance market, we create social programs to deal with this. In the case of externalities, we try to internalize the externality, i.e. make people pay for what they pollute/what they are getting for free. Instead of "boiling down every argument" to favor your statement, I suggest you offer a more balanced approach to everything.
I also still don't understand why you consider "asymmetric information" and "externality" so boring and irrelevant when the argument over labor and wages has gone on for far longer than either of these two concepts, and your generalizations of how all profits go to the fat cats at the top of the companies are certainly far older and boring than these two sources of market failure.
I would also like to apologize for the ad hominem attack I made where I accused you of not knowing what you are talking about. But that doesn't mean you should escalate it by accusing me of having bad reading comprehension and the like.
On January 28 2010 05:51 StorkHwaiting wrote: 3. What I said was that with the recent laws, corporations are able to influence the very watchdog that is supposed to regulate them.
How would the new law allow them to influence the politicians more than before? It is not about bribes, or are the parties allowed to give the money they get to individuals?
I mean, this is nothing like buying politicians, this whole deal is just about companies being allowed to contribute with ads.
Because if a corporation paid for the politician's campaign, the politician would then be indebted to them and would work hard to get laws passed that are favorable to the corporation? Are you really not understanding how corruption works? :-/
This is not how corruption works. Corruption would be if they took bribes. Bribes are not legal in most countries. It might tip the scales sometimes but it is not like they will make totally new laws just because corporation A helped their campaign. The voters still sits on the power and until you can buy votes or is free to bribe officials you can't really complain.
However global prosperity and living standarts have improved a lot over the last 30 years thanks to globalization.
How do you know they're because of globalization instead of far more powerful forces, like the green revolution or a vast number of technological advances?
because it is globalization that brings technological advances and know-how to 3rd world countries.
No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
So your entire argument is that the system is unsustainable because corporations are greedy and take out more than is put into the "system." First of all, the only thing you've demonstrated is that the US government, which is not a capitalist enterprise, last time I checked, takes out money that isn't put back in. So your entire argument that it's the corporations fault is based off of the US government taking money out through taxes.
You can use the taxes as a substitute for any form of externality, or any form of non transactional cost. Even the material upkeep of the store would break the cycle. The point is there's no wealth being created in the cycle, but there's a transactional cost regardless.
While this is true, L, his entire argument mentions nothing of externality, nor does it mention something about transactional costs either. It simply talks about taxes.
If you're insisting that transactional costs are a flaw, though, then by that argument no market system can ever be good because your outputs will never be 100% from your inputs. It's like the idea of a Carnot engine in chemistry-you will never have 100% efficiency with your heat engines because of the second law of thermodynamics and how entropy works. The transactional cost represents the difference of inputs to outputs.
I also like it when the OP proceeds to ignore my post and go to the next one.
That's not really true, because even if you don't have 100% efficiency, you can always have something other than a closed system; if you create wealth, then it can be destroyed by inefficiencies, but the onus would be on creating more wealth. If we take manufacturing to be the prototypical example of a clear value added process, we can see that MAKING STUFF GIVES YOU MONEY. If, however, the only thing you do is cyclically trade around retail goods, you simply run out over time.
The idea behind his statement is that the near complete collapse of manufacturing has stopped the input of wealth into the system, which is now spinning around in service industries being shaved down slowly.
This would certainly be the case if we looked at just the United States. But you have to look at the world as a whole, not just one country. If wealth were to be shaved down because the only industries in a country would be service industries, then several small countries would likely have collapsed economically by now.
We should probably ask the question "what is wealth?" before we can get into this sort of argument. My argument is that wealth is how much someone values something, and tends to be subjective for an individual but objective for the aggregate. Therefore, one could argue that the services that are provided to people through service industries are providing "intangible, illiquid" wealth to people purchasing their services. So while they may not be getting any monetary benefit from acquiring it, they are still spending the money to gain utility-but I digress regarding utility.
We could see a chain of money like this, however:
raw resources --> manufacturing--> distribution
each of these need money for their work, which they can acquire through loans or equity. This comes from financial institutions. To support these financial institutions are other institutions, and profit from all these companies goes to financial institutions so they can loan out more money, etc.
This is a very flimsy representation and is probably full of holes but I'm operating on two hours of sleep so my argumentation style is pretty crappy today.
See, that's where I have a problem with how "wealth" is assessed in America today.
While there is a certain utility value in consumption, it's a very very small amount for what's paid.
That's why there is this stark delineation between consumption and investment. Investment is spending resources to improve one's ability to produce. Consumption is spending resources for the sake of pleasure.
While it can be argued that consumption in a way is just a cost of production because people need to be happy/content/healthy etc to produce, there is a limit to how much consumption is actually necessary. In today's material culture, consumerism has gotten way out of hand. People do not need 5 generations of Ipods in as many years.
Please tell me you're not trying to quantify utility value with respect to money. That's like the number one DO NOT DO THIS thing in microeconomics 101.
And your argument has changed from "capitalism is evil" to "consumerism is wasteful." While the latter may very possibly be true, the two are distinct issues.
On January 28 2010 05:42 L wrote: You need to do more than say that globalization has existed while the standard of living has increased. You need to isolate globalization.
You and I both know that it is impossible to isolate it But I think it is undeniable that globalization brings infrastructure, work, technological advances and education to 3rd world countries.
However global prosperity and living standarts have improved a lot over the last 30 years thanks to globalization.
How do you know they're because of globalization instead of far more powerful forces, like the green revolution or a vast number of technological advances?
because it is globalization that brings technological advances and know-how to 3rd world countries.
No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
So your entire argument is that the system is unsustainable because corporations are greedy and take out more than is put into the "system." First of all, the only thing you've demonstrated is that the US government, which is not a capitalist enterprise, last time I checked, takes out money that isn't put back in. So your entire argument that it's the corporations fault is based off of the US government taking money out through taxes.
You can use the taxes as a substitute for any form of externality, or any form of non transactional cost. Even the material upkeep of the store would break the cycle. The point is there's no wealth being created in the cycle, but there's a transactional cost regardless.
While this is true, L, his entire argument mentions nothing of externality, nor does it mention something about transactional costs either. It simply talks about taxes.
If you're insisting that transactional costs are a flaw, though, then by that argument no market system can ever be good because your outputs will never be 100% from your inputs. It's like the idea of a Carnot engine in chemistry-you will never have 100% efficiency with your heat engines because of the second law of thermodynamics and how entropy works. The transactional cost represents the difference of inputs to outputs.
I also like it when the OP proceeds to ignore my post and go to the next one.
That's not really true, because even if you don't have 100% efficiency, you can always have something other than a closed system; if you create wealth, then it can be destroyed by inefficiencies, but the onus would be on creating more wealth. If we take manufacturing to be the prototypical example of a clear value added process, we can see that MAKING STUFF GIVES YOU MONEY. If, however, the only thing you do is cyclically trade around retail goods, you simply run out over time.
The idea behind his statement is that the near complete collapse of manufacturing has stopped the input of wealth into the system, which is now spinning around in service industries being shaved down slowly.
On January 28 2010 05:40 REDBLUEGREEN wrote:
On January 28 2010 05:28 L wrote: No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
If you read my post again you will notice that I spoke about technological advances and know-how not the green revolution. Some people might spend money to educate people in 3rd world countries just because they are awesome persons, but corporations that operate factories also have to educate and bring know-how to their personnel in order to function properly.
The green revolution is the largest example of a sharing of technological advances and know-how. It occured pre globalization and has probably saved billions from starvation.
You need to do more than say that globalization has existed while the standard of living has increased. You need to isolate globalization.
Yup ,100% L. Thank you for communicating that more eloquently than I did. The point of my Gamestop analogy was not to show off the precise mechanics of economics, it was merely to illustrate in a very simple way for people NOT acquainted with economics, that the value-added process has been destroyed in America.
what value-added process? do you know what that means? you're talking about taxes and how taxes somehow make everyone poor and unsustainable. are you serious? your manipulation of numbers is astounding i don't know how you went from paying taxes to
The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.
but either you're a super mega genius or you have no idea what you are talking about.
I'm done with this thread. It's basically a shorter version of the Shock Doctrine with no facts or evidence, cherrypicked or not. When you claim you want to debate something and then proceed to claim that your arguments are watered down for general consumption, you clearly are looking only to entice people that are like ron paul fans or w/e that tend to be more easily-picked apart views when it comes to economical issues.
OP, are you assuming that there can't be a lot of regulation in a capitalistic system? I think that is wrong. Even the U.S., one of the less regulated systems, still has a great deal of regulation in every industry that tries to deal with the problems of monopoly and labor.
And the Asian capitalist countries (tigers) basically became thriving capitalistic markets because of government intervention and regulation. It's not enough to criticize capitalism as a theory, because no country even remotely purely capitalistic.
On January 28 2010 06:16 Slow Motion wrote: OP, are you assuming that there can't be a lot of regulation in a capitalistic system? I think that is wrong. Even the U.S., one of the less regulated systems, still has a great deal of regulation in every industry that tries to deal with the problems of monopoly and labor.
And the Asian capitalist countries (tigers) basically became thriving capitalistic markets because of government intervention and regulation. It's not enough to criticize capitalism as a theory, because no country even remotely purely capitalistic.
I completely agree. I am advocating for more gov't intervention and regulation. That is all. The current trend in capitalism is away from gov't intervention and regulation, which I think is wrong.
On January 28 2010 06:15 mahnini wrote: of all the threads on TL about monetary policy / economic discussion even at the zenith of the bank bailouts i think this is the worst one.
On January 28 2010 04:52 zeppelin wrote: A capitalist will tell you that capitalism is the best system because people are rational actors.
Show them the sum total of human psychology research as counter-evidence to this claim (as well as the fact that marketing exists as a profession) and rather than admit they are wrong they will insist that those people do not deserve to succeed.
However global prosperity and living standarts have improved a lot over the last 30 years thanks to globalization.
How do you know they're because of globalization instead of far more powerful forces, like the green revolution or a vast number of technological advances?
because it is globalization that brings technological advances and know-how to 3rd world countries.
No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
So your entire argument is that the system is unsustainable because corporations are greedy and take out more than is put into the "system." First of all, the only thing you've demonstrated is that the US government, which is not a capitalist enterprise, last time I checked, takes out money that isn't put back in. So your entire argument that it's the corporations fault is based off of the US government taking money out through taxes.
You can use the taxes as a substitute for any form of externality, or any form of non transactional cost. Even the material upkeep of the store would break the cycle. The point is there's no wealth being created in the cycle, but there's a transactional cost regardless.
While this is true, L, his entire argument mentions nothing of externality, nor does it mention something about transactional costs either. It simply talks about taxes.
If you're insisting that transactional costs are a flaw, though, then by that argument no market system can ever be good because your outputs will never be 100% from your inputs. It's like the idea of a Carnot engine in chemistry-you will never have 100% efficiency with your heat engines because of the second law of thermodynamics and how entropy works. The transactional cost represents the difference of inputs to outputs.
I also like it when the OP proceeds to ignore my post and go to the next one.
That's not really true, because even if you don't have 100% efficiency, you can always have something other than a closed system; if you create wealth, then it can be destroyed by inefficiencies, but the onus would be on creating more wealth. If we take manufacturing to be the prototypical example of a clear value added process, we can see that MAKING STUFF GIVES YOU MONEY. If, however, the only thing you do is cyclically trade around retail goods, you simply run out over time.
The idea behind his statement is that the near complete collapse of manufacturing has stopped the input of wealth into the system, which is now spinning around in service industries being shaved down slowly.
This would certainly be the case if we looked at just the United States. But you have to look at the world as a whole, not just one country. If wealth were to be shaved down because the only industries in a country would be service industries, then several small countries would likely have collapsed economically by now.
We should probably ask the question "what is wealth?" before we can get into this sort of argument. My argument is that wealth is how much someone values something, and tends to be subjective for an individual but objective for the aggregate. Therefore, one could argue that the services that are provided to people through service industries are providing "intangible, illiquid" wealth to people purchasing their services. So while they may not be getting any monetary benefit from acquiring it, they are still spending the money to gain utility-but I digress regarding utility.
We could see a chain of money like this, however:
raw resources --> manufacturing--> distribution
each of these need money for their work, which they can acquire through loans or equity. This comes from financial institutions. To support these financial institutions are other institutions, and profit from all these companies goes to financial institutions so they can loan out more money, etc.
This is a very flimsy representation and is probably full of holes but I'm operating on two hours of sleep so my argumentation style is pretty crappy today.
See, that's where I have a problem with how "wealth" is assessed in America today.
While there is a certain utility value in consumption, it's a very very small amount for what's paid.
That's why there is this stark delineation between consumption and investment. Investment is spending resources to improve one's ability to produce. Consumption is spending resources for the sake of pleasure.
While it can be argued that consumption in a way is just a cost of production because people need to be happy/content/healthy etc to produce, there is a limit to how much consumption is actually necessary. In today's material culture, consumerism has gotten way out of hand. People do not need 5 generations of Ipods in as many years.
Please tell me you're not trying to quantify utility value with respect to money. That's like the number one DO NOT DO THIS thing in microeconomics 101.
And your argument has changed from "capitalism is evil" to "consumerism is wasteful." While the latter may very possibly be true, the two are distinct issues.
My argument was never capitalism is evil. It was that deregulation of markets leads to evil. Way to miss the point.
I am not trying to quantify utility value with money. Again, you really seem to lack reading comprehension. I'm not saying this as an insult. I'm saying this to try to communicate why I think you're making weird points that don't relate.
On January 28 2010 06:16 Slow Motion wrote: OP, are you assuming that there can't be a lot of regulation in a capitalistic system? I think that is wrong. Even the U.S., one of the less regulated systems, still has a great deal of regulation in every industry that tries to deal with the problems of monopoly and labor.
And the Asian capitalist countries (tigers) basically became thriving capitalistic markets because of government intervention and regulation. It's not enough to criticize capitalism as a theory, because no country even remotely purely capitalistic.
I completely agree. I am advocating for more gov't intervention and regulation. That is all. The current trend in capitalism is away from gov't intervention and regulation, which I think is wrong.
What? The current trend in capitalism is TOWARDS government intervention and regulation. Have you not noticed the recent revival of Keynesian economics?
However global prosperity and living standarts have improved a lot over the last 30 years thanks to globalization.
How do you know they're because of globalization instead of far more powerful forces, like the green revolution or a vast number of technological advances?
because it is globalization that brings technological advances and know-how to 3rd world countries.
No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
So your entire argument is that the system is unsustainable because corporations are greedy and take out more than is put into the "system." First of all, the only thing you've demonstrated is that the US government, which is not a capitalist enterprise, last time I checked, takes out money that isn't put back in. So your entire argument that it's the corporations fault is based off of the US government taking money out through taxes.
You can use the taxes as a substitute for any form of externality, or any form of non transactional cost. Even the material upkeep of the store would break the cycle. The point is there's no wealth being created in the cycle, but there's a transactional cost regardless.
While this is true, L, his entire argument mentions nothing of externality, nor does it mention something about transactional costs either. It simply talks about taxes.
If you're insisting that transactional costs are a flaw, though, then by that argument no market system can ever be good because your outputs will never be 100% from your inputs. It's like the idea of a Carnot engine in chemistry-you will never have 100% efficiency with your heat engines because of the second law of thermodynamics and how entropy works. The transactional cost represents the difference of inputs to outputs.
I also like it when the OP proceeds to ignore my post and go to the next one.
That's not really true, because even if you don't have 100% efficiency, you can always have something other than a closed system; if you create wealth, then it can be destroyed by inefficiencies, but the onus would be on creating more wealth. If we take manufacturing to be the prototypical example of a clear value added process, we can see that MAKING STUFF GIVES YOU MONEY. If, however, the only thing you do is cyclically trade around retail goods, you simply run out over time.
The idea behind his statement is that the near complete collapse of manufacturing has stopped the input of wealth into the system, which is now spinning around in service industries being shaved down slowly.
On January 28 2010 05:40 REDBLUEGREEN wrote:
On January 28 2010 05:28 L wrote: No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
If you read my post again you will notice that I spoke about technological advances and know-how not the green revolution. Some people might spend money to educate people in 3rd world countries just because they are awesome persons, but corporations that operate factories also have to educate and bring know-how to their personnel in order to function properly.
The green revolution is the largest example of a sharing of technological advances and know-how. It occured pre globalization and has probably saved billions from starvation.
You need to do more than say that globalization has existed while the standard of living has increased. You need to isolate globalization.
Yup ,100% L. Thank you for communicating that more eloquently than I did. The point of my Gamestop analogy was not to show off the precise mechanics of economics, it was merely to illustrate in a very simple way for people NOT acquainted with economics, that the value-added process has been destroyed in America.
what value-added process? do you know what that means? you're talking about taxes and how taxes somehow make everyone poor and unsustainable. are you serious? your manipulation of numbers is astounding i don't know how you went from paying taxes to
The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.
but either you're a super mega genius or you have no idea what you are talking about.
I'm a super mega genius. The entire point was to illustrate that there was no point in that cycle that any value was ever added.
You're crying because you don't see where any value was added in that process. So, I accomplished my job. Wewt.
I'm not saying taxes make everyone poor and unsustainable. I'm saying capital leaves the retail industry in the form of taxes and salaries to corporate execs. If the Main Street labor market is dependent on growth in the retail industry, then it's a very shaky foundation, seeing as retail has these constant siphons to pull money out of the industry. AKA growth in the retail sector is unsustainable.
Normally, this would be curtailed by the interplay between the manufacture sector and the retail sector playing off each other. The more sales retail has, the more orders for the manufacture sector, back and forth etc. That's how growth emerges in both sectors.
But now the manufacturing sector has been exported to foreign nations. This symbiotic dynamic has been broken. There is nothing but a constant flight of capital away from Main Street. It's really a simple concept, but you're so busy trying to get indignant over my imprecise economics that you choose to bluster and screech instead of see the actual point. It's an analogy. It's not a precise model of exactly what's going on in the entire US economy with every single tax law and channel of capital flow being described. If I wanted to write that, I'd go get a PhD in economics as I'd have pretty much done all the work with none of the benefit.
Now, the way I see it, what's currently taught in economics and finance classes in America is this concept of globalization, free market, capitalism, and less taxes/regulation = increased economic prosperity.
I want to go ahead and say that's crap.
First, one of the central tenets of modern capitalism is this concept that the "free" market leads to benefit for everyone.
This is wrong. Please choose the correct definition of Capitalism if you're going to discuss it.
On January 28 2010 06:16 Slow Motion wrote: OP, are you assuming that there can't be a lot of regulation in a capitalistic system? I think that is wrong. Even the U.S., one of the less regulated systems, still has a great deal of regulation in every industry that tries to deal with the problems of monopoly and labor.
And the Asian capitalist countries (tigers) basically became thriving capitalistic markets because of government intervention and regulation. It's not enough to criticize capitalism as a theory, because no country even remotely purely capitalistic.
I completely agree. I am advocating for more gov't intervention and regulation. That is all. The current trend in capitalism is away from gov't intervention and regulation, which I think is wrong.
What? The current trend in capitalism is TOWARDS government intervention and regulation. Have you not noticed the recent revival of Keynesian economics?
It's not a current trend. So far, it's mostly been a reactionary response to the economic crisis and a way to placate populist uproar. I'm trying to advocate that people should NOT write it off as a populist appeal, etc, and that there are very real reasons for why this economic collapse happened and why globalization/deregulation has failed the people.
You can look back through this thread alone to see people are still advocating that there was nothing inherently wrong with deregulation, free market principles, etc.
This is not a critique of capitalism. It is a critique of the current interpretation of capitalism that has been all the rage for the past 30 years. It's amazing to me how many people forget the rhetoric that was being spouted by proponents of free trade only two years ago.
On January 28 2010 06:12 Caller wrote: I'm done with this thread. It's basically a shorter version of the Shock Doctrine with no facts or evidence, cherrypicked or not. When you claim you want to debate something and then proceed to claim that your arguments are watered down for general consumption, you clearly are looking only to entice people that are like ron paul fans or w/e that tend to be more easily-picked apart views when it comes to economical issues.
I read the OP, then my mind immediately jumped to this and saw that somebody else had written it already.
On January 28 2010 06:16 Slow Motion wrote: OP, are you assuming that there can't be a lot of regulation in a capitalistic system? I think that is wrong. Even the U.S., one of the less regulated systems, still has a great deal of regulation in every industry that tries to deal with the problems of monopoly and labor.
And the Asian capitalist countries (tigers) basically became thriving capitalistic markets because of government intervention and regulation. It's not enough to criticize capitalism as a theory, because no country even remotely purely capitalistic.
I completely agree. I am advocating for more gov't intervention and regulation. That is all. The current trend in capitalism is away from gov't intervention and regulation, which I think is wrong.
What? The current trend in capitalism is TOWARDS government intervention and regulation. Have you not noticed the recent revival of Keynesian economics?
The recent revival of lipservice to Keynesian economics you mean?
On January 28 2010 05:19 L wrote: I bet the majority of the readers of this site aren't old enough to realize just how different the wages are between now and 1970 because they weren't alive buying appliances and raising a family in the 1970s.
Rofl. You bet most of the readers of this site aren't so old that they were raising a family in the 1970's? No fucking shit? You don't need to be 60+ years old to look at statistics for wages in 1970 and statistics for wages now and make a comparison.
Btw StorkHwaiting i don't understand how people can disagree with you as you are stating the obvious. Globalization raping the lower middle class in Western countries is common knowledge but it is funny to see all those guys with an eco degree in the thread raging because you are discussing an Economic issue lol. Economy is as scientific as Sociology, History or Political science. I mean all those guys with Phd, Nobel prizes etc ... they weren't able to predict the crisis. I don't want to be mean but there many people ( Stiglitz, Greenspan etc ... ) who are way more qualified than anyone in this thread and guess what they were completly wrong. So my advice for guys like Caller is to get off of their high horse because having an eco degree is like being C on Iccup and thinking that you are the shit whereas you are just a stupid copycat who has learnt a couple of build orders / eco models. Be humble.
However global prosperity and living standarts have improved a lot over the last 30 years thanks to globalization.
How do you know they're because of globalization instead of far more powerful forces, like the green revolution or a vast number of technological advances?
because it is globalization that brings technological advances and know-how to 3rd world countries.
No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
So your entire argument is that the system is unsustainable because corporations are greedy and take out more than is put into the "system." First of all, the only thing you've demonstrated is that the US government, which is not a capitalist enterprise, last time I checked, takes out money that isn't put back in. So your entire argument that it's the corporations fault is based off of the US government taking money out through taxes.
You can use the taxes as a substitute for any form of externality, or any form of non transactional cost. Even the material upkeep of the store would break the cycle. The point is there's no wealth being created in the cycle, but there's a transactional cost regardless.
While this is true, L, his entire argument mentions nothing of externality, nor does it mention something about transactional costs either. It simply talks about taxes.
If you're insisting that transactional costs are a flaw, though, then by that argument no market system can ever be good because your outputs will never be 100% from your inputs. It's like the idea of a Carnot engine in chemistry-you will never have 100% efficiency with your heat engines because of the second law of thermodynamics and how entropy works. The transactional cost represents the difference of inputs to outputs.
I also like it when the OP proceeds to ignore my post and go to the next one.
That's not really true, because even if you don't have 100% efficiency, you can always have something other than a closed system; if you create wealth, then it can be destroyed by inefficiencies, but the onus would be on creating more wealth. If we take manufacturing to be the prototypical example of a clear value added process, we can see that MAKING STUFF GIVES YOU MONEY. If, however, the only thing you do is cyclically trade around retail goods, you simply run out over time.
The idea behind his statement is that the near complete collapse of manufacturing has stopped the input of wealth into the system, which is now spinning around in service industries being shaved down slowly.
On January 28 2010 05:40 REDBLUEGREEN wrote:
On January 28 2010 05:28 L wrote: No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
If you read my post again you will notice that I spoke about technological advances and know-how not the green revolution. Some people might spend money to educate people in 3rd world countries just because they are awesome persons, but corporations that operate factories also have to educate and bring know-how to their personnel in order to function properly.
The green revolution is the largest example of a sharing of technological advances and know-how. It occured pre globalization and has probably saved billions from starvation.
You need to do more than say that globalization has existed while the standard of living has increased. You need to isolate globalization.
Yup ,100% L. Thank you for communicating that more eloquently than I did. The point of my Gamestop analogy was not to show off the precise mechanics of economics, it was merely to illustrate in a very simple way for people NOT acquainted with economics, that the value-added process has been destroyed in America.
what value-added process? do you know what that means? you're talking about taxes and how taxes somehow make everyone poor and unsustainable. are you serious? your manipulation of numbers is astounding i don't know how you went from paying taxes to
The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.
but either you're a super mega genius or you have no idea what you are talking about.
I'm a super mega genius. The entire point was to illustrate that there was no point in that cycle that any value was ever added.
You're crying because you don't see where any value was added in that process. So, I accomplished my job. Wewt.
I'm not saying taxes make everyone poor and unsustainable. I'm saying capital leaves the retail industry in the form of taxes and salaries to corporate execs. If the Main Street labor market is dependent on growth in the retail industry, then it's a very shaky foundation, seeing as retail has these constant siphons to pull money out of the industry. AKA growth in the retail sector is unsustainable.
Normally, this would be curtailed by the interplay between the manufacture sector and the retail sector playing off each other. The more sales retail has, the more orders for the manufacture sector, back and forth etc. That's how growth emerges in both sectors.
But now the manufacturing sector has been exported to foreign nations. This symbiotic dynamic has been broken. There is nothing but a constant flight of capital away from Main Street. It's really a simple concept, but you're so busy trying to get indignant over my imprecise economics that you choose to bluster and screech instead of see the actual point. It's an analogy. It's not a precise model of exactly what's going on in the entire US economy with every single tax law and channel of capital flow being described. If I wanted to write that, I'd go get a PhD in economics as I'd have pretty much done all the work with none of the benefit.
you're assuming that the retailers lose money because manufacturers are being exported? there is no change in the dynamic here just because manufacturing has moved. more retail still = more manufacturing. people buy things, retail makes profit, manufacturer makes profit. sure, this takes away low skill labor but it creates labor as well because now there are more distribution and management issues to be handled. keeping manufacturing here would hurt retail far more as cost for labor would be so much higher raising price for goods.
StorkHwaiting: wtf are you talking about? where did you get your definition of free market capitalism and agents acting in economic environment. How did you manage to get anything about rationally acting beings in the theory? The only schools of thought that defends free market capitalism is Austrian school of economy and does not base its argumentation on anything you are talking about. And when you were designing your fairy tale stories about monopolies were you on crack? Nothing such as a monopoly exists in a free market environment except for the case when the single company actually provides goods and services on a level no other competitor is able to match, which is the very nature of efficiency. The word monopoly was originally used as a label for companies which were granted exclusive rights for production of a good/service by THE GOVERNMENT. Monopolies are the sole providers because other competitors are prohibited to enter by force. In course of history you would hardly find an example of a company which is a single provider of a good without the interference of government. Only companies which actually managed to be efficient in the long run could fight off their competition (which is the desirable state). The reason a monopoly can not exist is potential competition, not the actual number of companies doing the same thing. The second a situation arises where only 1 provider offers products with big margins other entrepreneurs will enter the market to feed on it. The only way a company can remain the single provider is by keeping the price low enough to make the potential profit of its competitor not worth the opportunity cost, thus being efficient. Monopolies as you describe them don't exist in a free market environment.
on the actual approach of the Austrian school of economy on Monopoly and competition: http://mises.org/media/2136?silverlight=0 includes contradicton the myths about monopolies
On January 28 2010 07:01 bUbUsHeD wrote: StorkHwaiting: wtf are you talking about? where did you get your definition of free market capitalism and agents acting in economic environment. How did you manage to get anything about rationally acting beings in the theory? The only schools of thought that defends free market capitalism is Austrian school of economy and does not base its argumentation on anything you are talking about. And when you were designing your fairy tale stories about monopolies were you on crack? Nothing such as a monopoly exists in a free market environment except for the case when the single company actually provides goods and services on a level no other competitor is able to match, which is the very nature of efficiency. The word monopoly was originally used as a label for companies which were granted exclusive rights for production of a good/service by THE GOVERNMENT. Monopolies are the sole providers because other competitors are prohibited to enter by force. In course of history you would hardly find an example of a company which is a single provider of a good without the interference of government. Only companies which actually managed to be efficient in the long run could fight off their competition (which is the desirable state). The reason a monopoly can not exist is potential competition, not the actual number of companies doing the same thing. The second a situation arises where only 1 provider offers products with big margins other entrepreneurs will enter the market to feed on it. The only way a company can remain the single provider is by keeping the price low enough to make the potential profit of its competitor not worth the opportunity cost, thus being efficient. Monopolies as you describe them don't exist in a free market environment.
on the actual approach of the Austrian school of economy on Monopoly and competition: http://mises.org/media/2136?silverlight=0 includes contradicton the myths about monopolies
Step 1. Start using line breaks. They are your friend. Step 2. Stop talking shit.
On January 28 2010 04:32 StorkHwaiting wrote: The problem with this theory is it doesn't account for the destructiveness of monopolies.
Which is why no country have ever run a completely free market without laws to protect against monopolies. No kind of pseudo monopoly will ever get stronger than the state and if they become too much of a problem the state will stop them. Big companies like Microsoft are constantly walking on a thread trying to exert as much power as possible will still staying within the laws, the reason they haven't crushed all competition is thanks to those laws. If there is a hole it will get patched and temporary abuse do not cause that much damage, so the system is safe.
Still socialists in Sweden want alcohol and drugs/meds monopolized....by the state?
That's some BS. The entire idea with a free market is to oppose monopolies, which are often times monopolies of the government/state. The idea is that competition leads to lower prices and thus is good for the customer.
Oh and globalization in the economic sense, is just another word for grabbing natural resources from third world countries (and others).
On January 28 2010 06:48 Boblion wrote: Btw StorkHwaiting i don't understand how people can disagree with you as you are stating the obvious. Globalization raping the lower middle class in Western countries is common knowledge but it is funny to see all those guys with an eco degree in the thread raging because you are discussing an Economic issue lol. Economy is as scientific as Sociology, History or Political science. I mean all those guys with Phd, Nobel prizes etc ... they weren't able to predict the crisis. I don't want to be mean but there many people ( Stiglitz, Greenspan etc ... ) who are way more qualified than anyone in this thread and guess what they were completly wrong. So my advice for guys like Caller is to get off of their high horse because having an eco degree is like being C on Iccup and thinking that you are the shit whereas you are just a stupid copycat who has learnt a couple of build orders / eco models. Be humble.
However global prosperity and living standarts have improved a lot over the last 30 years thanks to globalization.
How do you know they're because of globalization instead of far more powerful forces, like the green revolution or a vast number of technological advances?
because it is globalization that brings technological advances and know-how to 3rd world countries.
No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
So your entire argument is that the system is unsustainable because corporations are greedy and take out more than is put into the "system." First of all, the only thing you've demonstrated is that the US government, which is not a capitalist enterprise, last time I checked, takes out money that isn't put back in. So your entire argument that it's the corporations fault is based off of the US government taking money out through taxes.
You can use the taxes as a substitute for any form of externality, or any form of non transactional cost. Even the material upkeep of the store would break the cycle. The point is there's no wealth being created in the cycle, but there's a transactional cost regardless.
While this is true, L, his entire argument mentions nothing of externality, nor does it mention something about transactional costs either. It simply talks about taxes.
If you're insisting that transactional costs are a flaw, though, then by that argument no market system can ever be good because your outputs will never be 100% from your inputs. It's like the idea of a Carnot engine in chemistry-you will never have 100% efficiency with your heat engines because of the second law of thermodynamics and how entropy works. The transactional cost represents the difference of inputs to outputs.
I also like it when the OP proceeds to ignore my post and go to the next one.
That's not really true, because even if you don't have 100% efficiency, you can always have something other than a closed system; if you create wealth, then it can be destroyed by inefficiencies, but the onus would be on creating more wealth. If we take manufacturing to be the prototypical example of a clear value added process, we can see that MAKING STUFF GIVES YOU MONEY. If, however, the only thing you do is cyclically trade around retail goods, you simply run out over time.
The idea behind his statement is that the near complete collapse of manufacturing has stopped the input of wealth into the system, which is now spinning around in service industries being shaved down slowly.
On January 28 2010 05:40 REDBLUEGREEN wrote:
On January 28 2010 05:28 L wrote: No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
If you read my post again you will notice that I spoke about technological advances and know-how not the green revolution. Some people might spend money to educate people in 3rd world countries just because they are awesome persons, but corporations that operate factories also have to educate and bring know-how to their personnel in order to function properly.
The green revolution is the largest example of a sharing of technological advances and know-how. It occured pre globalization and has probably saved billions from starvation.
You need to do more than say that globalization has existed while the standard of living has increased. You need to isolate globalization.
Yup ,100% L. Thank you for communicating that more eloquently than I did. The point of my Gamestop analogy was not to show off the precise mechanics of economics, it was merely to illustrate in a very simple way for people NOT acquainted with economics, that the value-added process has been destroyed in America.
what value-added process? do you know what that means? you're talking about taxes and how taxes somehow make everyone poor and unsustainable. are you serious? your manipulation of numbers is astounding i don't know how you went from paying taxes to
The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.
but either you're a super mega genius or you have no idea what you are talking about.
I'm a super mega genius. The entire point was to illustrate that there was no point in that cycle that any value was ever added.
You're crying because you don't see where any value was added in that process. So, I accomplished my job. Wewt.
I'm not saying taxes make everyone poor and unsustainable. I'm saying capital leaves the retail industry in the form of taxes and salaries to corporate execs. If the Main Street labor market is dependent on growth in the retail industry, then it's a very shaky foundation, seeing as retail has these constant siphons to pull money out of the industry. AKA growth in the retail sector is unsustainable.
Normally, this would be curtailed by the interplay between the manufacture sector and the retail sector playing off each other. The more sales retail has, the more orders for the manufacture sector, back and forth etc. That's how growth emerges in both sectors.
But now the manufacturing sector has been exported to foreign nations. This symbiotic dynamic has been broken. There is nothing but a constant flight of capital away from Main Street. It's really a simple concept, but you're so busy trying to get indignant over my imprecise economics that you choose to bluster and screech instead of see the actual point. It's an analogy. It's not a precise model of exactly what's going on in the entire US economy with every single tax law and channel of capital flow being described. If I wanted to write that, I'd go get a PhD in economics as I'd have pretty much done all the work with none of the benefit.
you're assuming that the retailers lose money because manufacturers are being exported? there is no change in the dynamic here just because manufacturing has moved. more retail still = more manufacturing. people buy things, retail makes profit, manufacturer makes profit. sure, this takes away low skill labor but it creates labor as well because now there are more distribution and management issues to be handled. keeping manufacturing here would hurt retail far more as cost for labor would be so much higher raising price for goods.
But the distribution/management chains require far fewer people, whereas our population is growing with each generation. I see mechanization replacing human labor in the USA, but the people who lost those old manufacturing jobs are just not intelligent enough to find work in a society only interested in high skill labor. At best, the lower classes can become janitors, trash collectors, room service etc. And very few of these jobs are enough to sustain a family.
Traditionally, society relied on agriculture as a way for poorer, less educated people to sustain themselves. This was transferred in large part to manufacturing during the industrial era. But now in the computer age, many of the manufacturing jobs that were lost don't have a parallel to shift into. I'm not trying to be mean, but there are a significant number of people in the population with limited intellectual capacity. They can't really go become supply-chain managers, or financial officers, etc.
Maybe that is progress, but I see it as a source for future volatility as the lower-middle classes will feel increasingly resentful towards income stratification. A big part of USA's stability in the 20th century was the formation of a large middle class. We're now seeing that middle class disappear, and with it, that once stable core of American citizens.
It's because morons run around trying to claim that the free market leads to increased efficiency and prosperity for all as long as everyone just makes decisions in a totally selfish manner. It doesn't. It doesn't work. The past 30 years have shown it doesn't work. It's led to disaster. The globalization and free market proponents were wrong. They did nothing but justify selfishness as a good thing.
Amen to this. You hit the nail on the head. It's not the concept of globalization that is the problem, it's the implementation. There will always be monied interests who will game the system and screw up a good thing for the rest of us.
Capitalism has flaws. But the trillion dollar question is...
What's the alternative?
The drive for wealth (or accumulation of capital - non-human, non-raw materials portion of production such as machinery, building, infrastructure, etc...wealthiest people own these in the form of stocks) serves as an incentive for investment, invention and production. It's the biggest incentive humanity has ever seen, and therefore capitalism produces more than any other system has done.
The problem you point out is how this maximally produced (at least at this point of history...who knows some other weird system produces more in the future) wealth is redistributed.
Welfare, taxes, etc distribute the wealth. Too much of this, there's no incentive for investment, invention and production and wealth shrinks. Too little of this, the world is screwed like you describe.
It's all about finding the right balance between these extremes.
On January 28 2010 07:25 sky_slasher wrote: Capitalism has flaws. But the trillion dollar question is...
What's the alternative?
The drive for wealth (or accumulation of capital - non-human, non-raw materials portion of production such as machinery, building, infrastructure, etc...wealthiest people own these in the form of stocks) serves as an incentive for investment, invention and production. It's the biggest incentive humanity has ever seen, and therefore capitalism produces more than any other system has done.
The problem you point out is how this maximally produced (at least at this point of history...who knows some other weird system produces more in the future) wealth is redistributed.
Welfare, taxes, etc distribute the wealth. Too much of this, there's no incentive for investment, invention and production and wealth shrinks. Too little of this, the world is screwed like you describe.
It's all about finding the right balance between these extremes.
You are trying to discredit capitalism and free market by comparing it with ideals. Your flawed argumentation is built upon that. That's just dumb. Capitalism has flaws, nevertheless, a free-market is and has been the best way for countries wealth to be produced and distributed.
On January 28 2010 07:36 GoTuNk! wrote: You are trying to discredit capitalism and free market by comparing it with ideals. Your flawed argumentation is built upon that. That's just dumb. Capitalism has flaws, nevertheless, a free-market is and has been the best way for countries wealth to be produced and distributed.
Would you mind backing that up? Thats your entire argument right there, and it's just a blind statement of fact. Something tells me you can't back it up with any evidence.
On January 28 2010 04:32 StorkHwaiting wrote: The problem with this theory is it doesn't account for the destructiveness of monopolies.
Which is why no country have ever run a completely free market without laws to protect against monopolies. No kind of pseudo monopoly will ever get stronger than the state and if they become too much of a problem the state will stop them. Big companies like Microsoft are constantly walking on a thread trying to exert as much power as possible will still staying within the laws, the reason they haven't crushed all competition is thanks to those laws. If there is a hole it will get patched and temporary abuse do not cause that much damage, so the system is safe.
Still socialists in Sweden want alcohol and drugs/meds monopolized....by the state?
That's some BS. The entire idea with a free market is to oppose monopolies, which are often times monopolies of the government/state. The idea is that competition leads to lower prices and thus is good for the customer.
Yeah, I know. I am like most educated Swedes on our right wing while the crazies are mostly on the left. It seems like in the US on the other hand that this is reversed.
(This isn't to say that all who are on those sides are like that, just that those groups are drawn towards those sides)
On January 28 2010 07:36 GoTuNk! wrote: You are trying to discredit capitalism and free market by comparing it with ideals. Your flawed argumentation is built upon that. That's just dumb. Capitalism has flaws, nevertheless, a free-market is and has been the best way for countries wealth to be produced and distributed.
Would you mind backing that up? Thats your entire argument right there, and it's just a blind statement of fact. Something tells me you can't back it up with any evidence.
On January 28 2010 07:36 GoTuNk! wrote: You are trying to discredit capitalism and free market by comparing it with ideals. Your flawed argumentation is built upon that. That's just dumb. Capitalism has flaws, nevertheless, a free-market is and has been the best way for countries wealth to be produced and distributed.
No, he's trying to discredit modern globalism and the last 3 decades of laissez faire policies.
Like I said in my first post: this is the type of people you need to convince to the point of rebellion; it isn't going to happen, so this argument is going to be a waste of time in the big picture.
On January 28 2010 07:44 L wrote: Like I said in my first post: this is the type of people you need to convince to the point of rebellion; it isn't going to happen, so this argument is going to be a waste of time in the big picture.
Or maybe it is just because you guys are crazy and that this isn't such a big deal after all?
On January 28 2010 05:08 L wrote: [quote] How do you know they're because of globalization instead of far more powerful forces, like the green revolution or a vast number of technological advances?
because it is globalization that brings technological advances and know-how to 3rd world countries.
No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
So your entire argument is that the system is unsustainable because corporations are greedy and take out more than is put into the "system." First of all, the only thing you've demonstrated is that the US government, which is not a capitalist enterprise, last time I checked, takes out money that isn't put back in. So your entire argument that it's the corporations fault is based off of the US government taking money out through taxes.
You can use the taxes as a substitute for any form of externality, or any form of non transactional cost. Even the material upkeep of the store would break the cycle. The point is there's no wealth being created in the cycle, but there's a transactional cost regardless.
While this is true, L, his entire argument mentions nothing of externality, nor does it mention something about transactional costs either. It simply talks about taxes.
If you're insisting that transactional costs are a flaw, though, then by that argument no market system can ever be good because your outputs will never be 100% from your inputs. It's like the idea of a Carnot engine in chemistry-you will never have 100% efficiency with your heat engines because of the second law of thermodynamics and how entropy works. The transactional cost represents the difference of inputs to outputs.
I also like it when the OP proceeds to ignore my post and go to the next one.
That's not really true, because even if you don't have 100% efficiency, you can always have something other than a closed system; if you create wealth, then it can be destroyed by inefficiencies, but the onus would be on creating more wealth. If we take manufacturing to be the prototypical example of a clear value added process, we can see that MAKING STUFF GIVES YOU MONEY. If, however, the only thing you do is cyclically trade around retail goods, you simply run out over time.
The idea behind his statement is that the near complete collapse of manufacturing has stopped the input of wealth into the system, which is now spinning around in service industries being shaved down slowly.
On January 28 2010 05:40 REDBLUEGREEN wrote:
On January 28 2010 05:28 L wrote: No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
If you read my post again you will notice that I spoke about technological advances and know-how not the green revolution. Some people might spend money to educate people in 3rd world countries just because they are awesome persons, but corporations that operate factories also have to educate and bring know-how to their personnel in order to function properly.
The green revolution is the largest example of a sharing of technological advances and know-how. It occured pre globalization and has probably saved billions from starvation.
You need to do more than say that globalization has existed while the standard of living has increased. You need to isolate globalization.
Yup ,100% L. Thank you for communicating that more eloquently than I did. The point of my Gamestop analogy was not to show off the precise mechanics of economics, it was merely to illustrate in a very simple way for people NOT acquainted with economics, that the value-added process has been destroyed in America.
what value-added process? do you know what that means? you're talking about taxes and how taxes somehow make everyone poor and unsustainable. are you serious? your manipulation of numbers is astounding i don't know how you went from paying taxes to
The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.
but either you're a super mega genius or you have no idea what you are talking about.
I'm a super mega genius. The entire point was to illustrate that there was no point in that cycle that any value was ever added.
You're crying because you don't see where any value was added in that process. So, I accomplished my job. Wewt.
I'm not saying taxes make everyone poor and unsustainable. I'm saying capital leaves the retail industry in the form of taxes and salaries to corporate execs. If the Main Street labor market is dependent on growth in the retail industry, then it's a very shaky foundation, seeing as retail has these constant siphons to pull money out of the industry. AKA growth in the retail sector is unsustainable.
Normally, this would be curtailed by the interplay between the manufacture sector and the retail sector playing off each other. The more sales retail has, the more orders for the manufacture sector, back and forth etc. That's how growth emerges in both sectors.
But now the manufacturing sector has been exported to foreign nations. This symbiotic dynamic has been broken. There is nothing but a constant flight of capital away from Main Street. It's really a simple concept, but you're so busy trying to get indignant over my imprecise economics that you choose to bluster and screech instead of see the actual point. It's an analogy. It's not a precise model of exactly what's going on in the entire US economy with every single tax law and channel of capital flow being described. If I wanted to write that, I'd go get a PhD in economics as I'd have pretty much done all the work with none of the benefit.
you're assuming that the retailers lose money because manufacturers are being exported? there is no change in the dynamic here just because manufacturing has moved. more retail still = more manufacturing. people buy things, retail makes profit, manufacturer makes profit. sure, this takes away low skill labor but it creates labor as well because now there are more distribution and management issues to be handled. keeping manufacturing here would hurt retail far more as cost for labor would be so much higher raising price for goods.
But the distribution/management chains require far fewer people, whereas our population is growing with each generation. I see mechanization replacing human labor in the USA, but the people who lost those old manufacturing jobs are just not intelligent enough to find work in a society only interested in high skill labor. At best, the lower classes can become janitors, trash collectors, room service etc. And very few of these jobs are enough to sustain a family.
Traditionally, society relied on agriculture as a way for poorer, less educated people to sustain themselves. This was transferred in large part to manufacturing during the industrial era. But now in the computer age, many of the manufacturing jobs that were lost don't have a parallel to shift into. I'm not trying to be mean, but there are a significant number of people in the population with limited intellectual capacity. They can't really go become supply-chain managers, or financial officers, etc.
Maybe that is progress, but I see it as a source for future volatility as the lower-middle classes will feel increasingly resentful towards income stratification. A big part of USA's stability in the 20th century was the formation of a large middle class. We're now seeing that middle class disappear, and with it, that once stable core of American citizens.
what you are describing is what has happened before, is happening now, and will happen for all time. unskilled laborers becoming irrelevant, who'd have thought?
this, however, is a separate issue and really has nothing to do with globalization as it would happen regardless.
On January 28 2010 04:32 StorkHwaiting wrote: The problem with this theory is it doesn't account for the destructiveness of monopolies.
Which is why no country have ever run a completely free market without laws to protect against monopolies. No kind of pseudo monopoly will ever get stronger than the state and if they become too much of a problem the state will stop them. Big companies like Microsoft are constantly walking on a thread trying to exert as much power as possible will still staying within the laws, the reason they haven't crushed all competition is thanks to those laws. If there is a hole it will get patched and temporary abuse do not cause that much damage, so the system is safe.
Still socialists in Sweden want alcohol and drugs/meds monopolized....by the state?
That's some BS. The entire idea with a free market is to oppose monopolies, which are often times monopolies of the government/state. The idea is that competition leads to lower prices and thus is good for the customer.
Yeah, I know. I am like most educated Swedes on our right wing while the crazies are mostly on the left. It seems like in the US on the other hand that this is reversed.
(This isn't to say that all who are on those sides are like that, just that those groups are drawn towards those sides)
Your definition of 'crazy' seems to be 'people who don't think like me'.
On January 28 2010 07:36 GoTuNk! wrote: You are trying to discredit capitalism and free market by comparing it with ideals. Your flawed argumentation is built upon that. That's just dumb. Capitalism has flaws, nevertheless, a free-market is and has been the best way for countries wealth to be produced and distributed.
Would you mind backing that up? Thats your entire argument right there, and it's just a blind statement of fact. Something tells me you can't back it up with any evidence.
That wasn't me, but are you serious?
Yes. I'm serious. How can you possibly back that up? The domination of capitalism (at either the point of a gun or the threat of total withdrawl of investment or the strings attached to various IMF loans) has stopped all serious alternatives being tested.
Furthermore, wealth shouldn't be the ultimate indicator anyway. General quality of life perhaps.
I have so many problems with the OP that I want to cry. My advice is simple; if you "100% agree" with the OP then take some economics courses, go read Globalization and Its Discontents by Stiglitz (if you're interested in globalization, deregulation, historical contexts, etc), and let this thread die.
And to preempt those people that want a "spirited debate" on this topic, I assure you that there is little substance in these posts, and those in disagreement with the OP somehow have mustered the energy to teach you economics 101 (instead of letting you go on with your lives in ignorance).
On January 28 2010 05:19 REDBLUEGREEN wrote: [quote] because it is globalization that brings technological advances and know-how to 3rd world countries.
No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
So your entire argument is that the system is unsustainable because corporations are greedy and take out more than is put into the "system." First of all, the only thing you've demonstrated is that the US government, which is not a capitalist enterprise, last time I checked, takes out money that isn't put back in. So your entire argument that it's the corporations fault is based off of the US government taking money out through taxes.
You can use the taxes as a substitute for any form of externality, or any form of non transactional cost. Even the material upkeep of the store would break the cycle. The point is there's no wealth being created in the cycle, but there's a transactional cost regardless.
While this is true, L, his entire argument mentions nothing of externality, nor does it mention something about transactional costs either. It simply talks about taxes.
If you're insisting that transactional costs are a flaw, though, then by that argument no market system can ever be good because your outputs will never be 100% from your inputs. It's like the idea of a Carnot engine in chemistry-you will never have 100% efficiency with your heat engines because of the second law of thermodynamics and how entropy works. The transactional cost represents the difference of inputs to outputs.
I also like it when the OP proceeds to ignore my post and go to the next one.
That's not really true, because even if you don't have 100% efficiency, you can always have something other than a closed system; if you create wealth, then it can be destroyed by inefficiencies, but the onus would be on creating more wealth. If we take manufacturing to be the prototypical example of a clear value added process, we can see that MAKING STUFF GIVES YOU MONEY. If, however, the only thing you do is cyclically trade around retail goods, you simply run out over time.
The idea behind his statement is that the near complete collapse of manufacturing has stopped the input of wealth into the system, which is now spinning around in service industries being shaved down slowly.
On January 28 2010 05:40 REDBLUEGREEN wrote:
On January 28 2010 05:28 L wrote: No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
If you read my post again you will notice that I spoke about technological advances and know-how not the green revolution. Some people might spend money to educate people in 3rd world countries just because they are awesome persons, but corporations that operate factories also have to educate and bring know-how to their personnel in order to function properly.
The green revolution is the largest example of a sharing of technological advances and know-how. It occured pre globalization and has probably saved billions from starvation.
You need to do more than say that globalization has existed while the standard of living has increased. You need to isolate globalization.
Yup ,100% L. Thank you for communicating that more eloquently than I did. The point of my Gamestop analogy was not to show off the precise mechanics of economics, it was merely to illustrate in a very simple way for people NOT acquainted with economics, that the value-added process has been destroyed in America.
what value-added process? do you know what that means? you're talking about taxes and how taxes somehow make everyone poor and unsustainable. are you serious? your manipulation of numbers is astounding i don't know how you went from paying taxes to
The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.
but either you're a super mega genius or you have no idea what you are talking about.
I'm a super mega genius. The entire point was to illustrate that there was no point in that cycle that any value was ever added.
You're crying because you don't see where any value was added in that process. So, I accomplished my job. Wewt.
I'm not saying taxes make everyone poor and unsustainable. I'm saying capital leaves the retail industry in the form of taxes and salaries to corporate execs. If the Main Street labor market is dependent on growth in the retail industry, then it's a very shaky foundation, seeing as retail has these constant siphons to pull money out of the industry. AKA growth in the retail sector is unsustainable.
Normally, this would be curtailed by the interplay between the manufacture sector and the retail sector playing off each other. The more sales retail has, the more orders for the manufacture sector, back and forth etc. That's how growth emerges in both sectors.
But now the manufacturing sector has been exported to foreign nations. This symbiotic dynamic has been broken. There is nothing but a constant flight of capital away from Main Street. It's really a simple concept, but you're so busy trying to get indignant over my imprecise economics that you choose to bluster and screech instead of see the actual point. It's an analogy. It's not a precise model of exactly what's going on in the entire US economy with every single tax law and channel of capital flow being described. If I wanted to write that, I'd go get a PhD in economics as I'd have pretty much done all the work with none of the benefit.
you're assuming that the retailers lose money because manufacturers are being exported? there is no change in the dynamic here just because manufacturing has moved. more retail still = more manufacturing. people buy things, retail makes profit, manufacturer makes profit. sure, this takes away low skill labor but it creates labor as well because now there are more distribution and management issues to be handled. keeping manufacturing here would hurt retail far more as cost for labor would be so much higher raising price for goods.
But the distribution/management chains require far fewer people, whereas our population is growing with each generation. I see mechanization replacing human labor in the USA, but the people who lost those old manufacturing jobs are just not intelligent enough to find work in a society only interested in high skill labor. At best, the lower classes can become janitors, trash collectors, room service etc. And very few of these jobs are enough to sustain a family.
Traditionally, society relied on agriculture as a way for poorer, less educated people to sustain themselves. This was transferred in large part to manufacturing during the industrial era. But now in the computer age, many of the manufacturing jobs that were lost don't have a parallel to shift into. I'm not trying to be mean, but there are a significant number of people in the population with limited intellectual capacity. They can't really go become supply-chain managers, or financial officers, etc.
Maybe that is progress, but I see it as a source for future volatility as the lower-middle classes will feel increasingly resentful towards income stratification. A big part of USA's stability in the 20th century was the formation of a large middle class. We're now seeing that middle class disappear, and with it, that once stable core of American citizens.
what you are describing is what has happened before, is happening now, and will happen for all time. unskilled laborers becoming irrelevant, who'd have thought?
this, however, is a separate issue and really has nothing to do with globalization as it would happen regardless.
Structural unemployment has nothing to do with globalization? Hm, that's a new one.
And I disagree that this has happened before. We have not had a precedent where a sector as huge as agriculture or manufacturing was rendered obsolete with no sustainable, value-added industry to replace it. A service based economy that relies on consumerism just doesn't work in my opinion. It doesn't benefit Main Street. Modern nations need to come up with a good solution to employing their less-skilled citizens. This is not like 5-8% of the population. It's a majority of the population that is increasingly losing their jobs without a sustainable industry to be employed in.
When you take the military, agriculture, and manufacturing out of the equation as main sources of employment, as we are seeing machines take over these jobs more and more, it becomes a serious issue that modern capitalism needs to address. So far, the answer has been rampant consumerism so that people can be employed in retail or service sectors. My point the whole time has been that this is an unsustainable strategy, built on the backs of 3rd world labor (which will not be 3rd world forever), and leads to no real growth because all we've really built are shopping malls and overflowing landfills full of thrown away merchandise.
Look at what's considered the modern day savior in economics right now. The world is hoping that China's citizens will rise up and create such a ridiculous amount of demand for products that it will pull the rest of the world out of the doldrums. What kind of exit strategy from recession is that? Let's hope China joins in on the rampant consumerism so we find more people willing to blow all their money on unneeded luxury goods and we can keep this ball rolling?
I'm sorry but quality of life is not ipods, flat screens, and blackberries. Not when we're forced to work more hours, at more intellectually strenuous occupations, with higher stress levels, for less effective pay. That's not an increase in quality of life.
On January 28 2010 04:32 StorkHwaiting wrote: The problem with this theory is it doesn't account for the destructiveness of monopolies.
Which is why no country have ever run a completely free market without laws to protect against monopolies. No kind of pseudo monopoly will ever get stronger than the state and if they become too much of a problem the state will stop them. Big companies like Microsoft are constantly walking on a thread trying to exert as much power as possible will still staying within the laws, the reason they haven't crushed all competition is thanks to those laws. If there is a hole it will get patched and temporary abuse do not cause that much damage, so the system is safe.
Still socialists in Sweden want alcohol and drugs/meds monopolized....by the state?
That's some BS. The entire idea with a free market is to oppose monopolies, which are often times monopolies of the government/state. The idea is that competition leads to lower prices and thus is good for the customer.
Yeah, I know. I am like most educated Swedes on our right wing while the crazies are mostly on the left. It seems like in the US on the other hand that this is reversed.
(This isn't to say that all who are on those sides are like that, just that those groups are drawn towards those sides)
Your definition of 'crazy' seems to be 'people who don't think like me'.
No, I said that crazy people are there, not that all who are there are crazy. I strictly pointed it out. For example one of our major left parties wants to forbid interest on loans and another is a mix between communism and feminism. (Real communism, not socialism, that is the biggest left party and they are quite sane)
On January 28 2010 07:36 GoTuNk! wrote: You are trying to discredit capitalism and free market by comparing it with ideals. Your flawed argumentation is built upon that. That's just dumb. Capitalism has flaws, nevertheless, a free-market is and has been the best way for countries wealth to be produced and distributed.
Would you mind backing that up? Thats your entire argument right there, and it's just a blind statement of fact. Something tells me you can't back it up with any evidence.
That wasn't me, but are you serious?
Yes. I'm serious. How can you possibly back that up? The domination of capitalism (at either the point of a gun or the threat of total withdrawl of investment or the strings attached to various IMF loans) has stopped all serious alternatives being tested.
Furthermore, wealth shouldn't be the ultimate indicator anyway. General quality of life perhaps.
Can you name the serious alternatives? The only I know of is that most is state or family owned and monopolies are everywhere, kinda like Soviet or almost any state at all before the modern times.
On January 28 2010 07:44 L wrote: Like I said in my first post: this is the type of people you need to convince to the point of rebellion; it isn't going to happen, so this argument is going to be a waste of time in the big picture.
Or maybe it is just because you guys are crazy and that this isn't such a big deal after all?
Well, most people would care about having a huge amount of money essentially milked from them, but I suppose when you don't bother about thinking about it, its easy to carry on producing so that you can support someone else's opulent lifestyle, one that you work harder to achieve in an expression of envy.
On January 28 2010 07:58 InsideTheBox wrote: I have so many problems with the OP that I want to cry. My advice is simple; if you "100% agree" with the OP then take some economics courses, go read Globalization and Its Discontents by Stiglitz (if you're interested in globalization, deregulation, historical contexts, etc), and let this thread die.
And to preempt those people that want a "spirited debate" on this topic, I assure you that there is little substance in these posts, and those in disagreement with the OP somehow have mustered the energy to teach you economics 101 (instead of letting you go on with your lives in ignorance).
Um, sorry to inform you, but Stiglitz is in agreement with my position. He's probably one of the biggest proponents of government intervention in capitalism. Sorry, but you kind of came out here, name dropped, then made yourself look bad by not even understanding what it is Stiglitz advocates.
Just because Stiglitz takes it from the angle of asymmetrical information and inefficiencies in the "invisible hand," while I take it from the angle of damage to domestic economies caused by said globalization, does not make me wrong. I'm choosing to focus on the effects, while he is focusing on the causes. Way to not understand anything, yet act like a pompous ass. Still, it was a pretty brilliant example of self-ownage.
Laissez-faire was the 1920s. This so called trend towards deregulation is just an increase in Ayn Rand fanatics.
That said, you are not focusing on your strongest point: that globalization is not always a good thing. Among other factors, it is an enforcer of political instability in Africa. I don't really feel like elaborating, just believe me =)
Also, if you make some grand theoretical statement like "EVERYTHING WE'RE DOING IS WRONG," please provide in the OP 1) concrete example 2) a fair representation of a counter opinion and 3) why this opinion is wrong.
This allows for a reasonable discussion about facts instead of a completely subjective discussion about fake politics and fake economics.
On January 28 2010 07:44 L wrote: Like I said in my first post: this is the type of people you need to convince to the point of rebellion; it isn't going to happen, so this argument is going to be a waste of time in the big picture.
Or maybe it is just because you guys are crazy and that this isn't such a big deal after all?
Well, most people would care about having a huge amount of money essentially milked from them, but I suppose when you don't bother about thinking about it, its easy to carry on producing so that you can support someone else's opulent lifestyle, one that you work harder to achieve in an expression of envy.
Controlled capitalism most of all produces economic growth, socialism produces equality. You can't make things equal without disrupting growth.
Anyhow, the problems you see are that jobs moves overseas. But you know, that isn't a problem! Those overseas are much poorer than the middle class of America. And you are still getting it better by all of this, since you can now buy cheap quality goods from Asia. You couldn't do that before. The downside is that when fewer buys American goods you get less jobs.
But really, what is happening is a great global equalisation, you guys had it way too good compared to the rest of the world and now capitalism is showering money over those countries getting things up to par.
You are just angry because this isn't making things better for yourself in every conceivable way. You want to stay as one of the over consumers of the world with 90% of the world having it worse than you.
On January 28 2010 07:44 L wrote: Like I said in my first post: this is the type of people you need to convince to the point of rebellion; it isn't going to happen, so this argument is going to be a waste of time in the big picture.
Or maybe it is just because you guys are crazy and that this isn't such a big deal after all?
Well, most people would care about having a huge amount of money essentially milked from them, but I suppose when you don't bother about thinking about it, its easy to carry on producing so that you can support someone else's opulent lifestyle, one that you work harder to achieve in an expression of envy.
Controlled capitalism most of all produces economic growth, socialism produces equality. You can't make things equal without disrupting growth.
Anyhow, the problems you see are that jobs moves overseas. But you know, that isn't a problem! Those overseas are much poorer than the middle class of America. And you are still getting it better by all of this, since you can now buy cheap quality goods from Asia. You couldn't do that before. The downside is that when fewer buys American goods you get less jobs.
But really, what is happening is a great global equalisation, you guys had it way too good compared to the rest of the world and now capitalism is showering money over those countries getting things up to par.
You are just angry because this isn't making things better for yourself in every conceivable way.
The point of a government is to better the lives of its citizens, not the world. Therefore, I have every right to be angry.
On January 28 2010 07:44 L wrote: Like I said in my first post: this is the type of people you need to convince to the point of rebellion; it isn't going to happen, so this argument is going to be a waste of time in the big picture.
Or maybe it is just because you guys are crazy and that this isn't such a big deal after all?
Well, most people would care about having a huge amount of money essentially milked from them, but I suppose when you don't bother about thinking about it, its easy to carry on producing so that you can support someone else's opulent lifestyle, one that you work harder to achieve in an expression of envy.
Controlled capitalism most of all produces economic growth, socialism produces equality. You can't make things equal without disrupting growth.
Anyhow, the problems you see are that jobs moves overseas. But you know, that isn't a problem! Those overseas are much poorer than the middle class of America. And you are still getting it better by all of this, since you can now buy cheap quality goods from Asia. You couldn't do that before. The downside is that when fewer buys American goods you get less jobs.
But really, what is happening is a great global equalisation, you guys had it way too good compared to the rest of the world and now capitalism is showering money over those countries getting things up to par.
You are just angry because this isn't making things better for yourself in every conceivable way.
The point of a government is to better the lives of its citizens, not the world. Therefore, I have every right to be angry.
But the thing is that stopping this procedure is politically not OK at all. Other countries would hate you for it and start embargo you. trust me that is the last thing you want, every country earns a lot on trade. Overprotecting your own businesses is in general seen as extremely rude, the world economy would break down instantly if every country started doing it, that would be the biggest economic crisis ever to have happened.
Many supposed "failures" of capitalism and the free-market are actually due to laws that stifle competition. In these cases, the failure is caused by a lack of a free-market.
A good example of this is health care. There is no inter-state competition. The entire system is a huge moral hazard, a giant cesspool of inefficiency where there is a back-office insurance agent doing paperwork for every two doctors. Think about the zero dollars you pay going to the dentist and all of that free tooth goodies you get even though you don't need it. SOMEONE is paying for that, whether it's the pool of monthly health care fees or the government. Looking at it backwards, YOU are paying for everyone else's health care. The doctors answer to the insurance companies and not the consumer. What is a free market in which the vendor is not held accountable to the consumer? If you had to pay for all those unnecessary goodies, would you still take them?
LASIK is currently not covered by many insurance companies. As a result, everywhere you'll see ads for "Get cheap LASIK for $xx.xx!" When there is healthy competition in which the consumer gets to choose what to pay for, not what the insurance companies choose to reimburse, prices go down and quality goes up. The terrible places go out of business and the good places compete with price, service, time, etc.
On January 28 2010 07:44 L wrote: Like I said in my first post: this is the type of people you need to convince to the point of rebellion; it isn't going to happen, so this argument is going to be a waste of time in the big picture.
Or maybe it is just because you guys are crazy and that this isn't such a big deal after all?
Well, most people would care about having a huge amount of money essentially milked from them, but I suppose when you don't bother about thinking about it, its easy to carry on producing so that you can support someone else's opulent lifestyle, one that you work harder to achieve in an expression of envy.
Controlled capitalism most of all produces economic growth, socialism produces equality. You can't make things equal without disrupting growth.
Anyhow, the problems you see are that jobs moves overseas. But you know, that isn't a problem! Those overseas are much poorer than the middle class of America. And you are still getting it better by all of this, since you can now buy cheap quality goods from Asia. You couldn't do that before. The downside is that when fewer buys American goods you get less jobs.
But really, what is happening is a great global equalisation, you guys had it way too good compared to the rest of the world and now capitalism is showering money over those countries getting things up to par.
You are just angry because this isn't making things better for yourself in every conceivable way.
The point of a government is to better the lives of its citizens, not the world. Therefore, I have every right to be angry.
But the thing is that stopping this procedure is politically not OK at all. Other countries would hate you for it and start embargo you. trust me that is the last thing you want, every country earns a lot on trade. Overprotecting your own businesses is in general seen as extremely rude, the world economy would break down instantly if every country started doing it, that would be the biggest economic crisis ever to have happened.
? Yes it is. Tariffs are part of doing business. Every country earns a lot of trade. That's why when you put an embargo on one product, they'll still keep selling you the other products, rather than throw a hissy fit and refuse to trade altogether.
It's not seen as rude. I'm not sure why you're acting like global trade is some kind of friendly tea party. Countries routinely do currency dumping, goods dumping, protectionist policies, fixing currencies to lower rates for unfair advantages, subsidizing industries to out-compete others.
Every country has protectionist policies and they started with even more of them before all of this globalization started. How exactly would the world economy break down instantly if countries had protectionist policies? There was a world economy during the Han Dynasty. You're telling me it's going to break down because a government starts acting in its own interests? Come on, dude. Realpolitik is the name of the game and everyone's known it for a long time.
After reading F.A. Hayak's book: The Road to Serfdom, I've come to realize that any type of central planning (communism, socialism, etc) is inherently evil and ultimately leads to tyranny. Capitalism is flawed much like we are, but I would much prefer to have the freedom to either fail or succeed instead of some central planners determining such.
OP, you arguments are irrational and ill informed, your opinions are charged by emotion and anger.
In order to understand economics we must first understand human nature.
1. Humans are insecure 2. Humans are selfish actors 3. Humans seek to overcome their insecurities in one of two ways a) Gaining power and thereby control (dominant method) b) religion (submissive alternative) 4. Humans are born unequal
Refuting Communism (I know you do not advocate it but I feel the need to refute it anyway)
1. Communism demands that everyone be equal, knowone may better themselves above anyone else. This goes against the natural instinct of all humans. This means ... a) Communism requires a huge amount of state control to work. (USSR, North Korea, Cuba, the Stasi etc.) b) economic markets are inefficient, people are disincentivised 2. Extreme central control results in horrendous living conditions and causes the communist state to fall apart.
Why Capitalism is the best system we have.
1) It allows people to act as selfish actors in line with their nature 2) It allows us to make our own decisions and exercise a certain amount of freedom. 3) Markets are efficient and people are incentivised
I'm afraid im to tired at the moment to go into any greater detail. The key point is that HUMANS ARE FUNDAMENTALLY FLAWED. Scholars seek a utopian system where everyone lives in perfect harmony. No such system can exist. This is not to say that regulation should not exist or is useless. It is merely to understand that it can only go so far in solving problems within the system.
To the opening poster: You spent much of your post criticising but you offered little in the way of solutions. I would like to know exactly what you would like to see changed and how you suggest it should be done. I advocate you undertake a detailed study of world systems theory as I think you will find it in accordance with your views. http://en.wikipedia.org/wiki/World_systems_theory
On a side note I believe that the growing inequality within the world cannot go on forever. There will undoubtably be a revolution in the future should we continue to follow this trend.
On January 28 2010 08:16 StRyKeR wrote: Many supposed "failures" of capitalism and the free-market are actually due to laws that stifle competition. In these cases, the failure is caused by a lack of a free-market.
A good example of this is health care. There is no inter-state competition. The entire system is a huge moral hazard, a giant cesspool of inefficiency where there is a back-office insurance agent doing paperwork for every two doctors. Think about the zero dollars you pay going to the dentist and all of that free tooth goodies you get even though you don't need it. SOMEONE is paying for that, whether it's the pool of monthly health care fees or the government. Looking at it backwards, YOU are paying for everyone else's health care. The doctors answer to the insurance companies and not the consumer. What is a free market in which the vendor is not held accountable to the consumer? If you had to pay for all those unnecessary goodies, would you still take them?
LASIK is currently not covered by many insurance companies. As a result, everywhere you'll see ads for "Get cheap LASIK for $xx.xx!" When there is healthy competition in which the consumer gets to choose what to pay for, not what the insurance companies choose to reimburse, prices go down and quality goes up. The terrible places go out of business and the good places compete with price, service, time, etc.
Actually LASIK is probably not a good example. There are a lot of rather horrifying cases of cheap LASIK operations for real cheap, and it's some guy with a cheap laser doing a shoddy job on people's eyes. They end up with double vision, dry itchy eyes, and all kinds of other terrible issues caused by shoddy work that's not well supervised.
On the other hand, health care is a totally broken industry. Mostly because of the ridiculous bottleneck in supply caused by an artificial limiter on the number of doctors.
I don't recall ever going to the dentist for free though. I pay $180 every time I go in for a cleaning.
On January 28 2010 07:44 L wrote: Like I said in my first post: this is the type of people you need to convince to the point of rebellion; it isn't going to happen, so this argument is going to be a waste of time in the big picture.
Or maybe it is just because you guys are crazy and that this isn't such a big deal after all?
Well, most people would care about having a huge amount of money essentially milked from them, but I suppose when you don't bother about thinking about it, its easy to carry on producing so that you can support someone else's opulent lifestyle, one that you work harder to achieve in an expression of envy.
Controlled capitalism most of all produces economic growth, socialism produces equality. You can't make things equal without disrupting growth.
Anyhow, the problems you see are that jobs moves overseas. But you know, that isn't a problem! Those overseas are much poorer than the middle class of America. And you are still getting it better by all of this, since you can now buy cheap quality goods from Asia. You couldn't do that before. The downside is that when fewer buys American goods you get less jobs.
But really, what is happening is a great global equalisation, you guys had it way too good compared to the rest of the world and now capitalism is showering money over those countries getting things up to par.
You are just angry because this isn't making things better for yourself in every conceivable way. You want to stay as one of the over consumers of the world with 90% of the world having it worse than you.
No, see, its not about over consuming, its about actually producing in step with consumption. The last 3 decades have been an exercise in overconsumption.
What's happening now isn't the great global equalization; the vast majority of the world's wealth is being taken up by fewer and fewer people who are living more and more opulent lifestyles, funded by you.
On January 28 2010 05:28 L wrote: [quote] No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
[quote] You can use the taxes as a substitute for any form of externality, or any form of non transactional cost. Even the material upkeep of the store would break the cycle. The point is there's no wealth being created in the cycle, but there's a transactional cost regardless.
While this is true, L, his entire argument mentions nothing of externality, nor does it mention something about transactional costs either. It simply talks about taxes.
If you're insisting that transactional costs are a flaw, though, then by that argument no market system can ever be good because your outputs will never be 100% from your inputs. It's like the idea of a Carnot engine in chemistry-you will never have 100% efficiency with your heat engines because of the second law of thermodynamics and how entropy works. The transactional cost represents the difference of inputs to outputs.
I also like it when the OP proceeds to ignore my post and go to the next one.
That's not really true, because even if you don't have 100% efficiency, you can always have something other than a closed system; if you create wealth, then it can be destroyed by inefficiencies, but the onus would be on creating more wealth. If we take manufacturing to be the prototypical example of a clear value added process, we can see that MAKING STUFF GIVES YOU MONEY. If, however, the only thing you do is cyclically trade around retail goods, you simply run out over time.
The idea behind his statement is that the near complete collapse of manufacturing has stopped the input of wealth into the system, which is now spinning around in service industries being shaved down slowly.
On January 28 2010 05:40 REDBLUEGREEN wrote:
On January 28 2010 05:28 L wrote: No it isn't. the green revolution started just after WW2 and was spreading of its own accord. The implementation of most strains of food which resulted in the revolution occured prior to 1970.
The modern era of globalization started in earnest after the tokyo GATT round in 1973 where the amount of tariff reductions secured was around 8 times higher than the prior round. This series of concessions then went on to create the WTO.
If you read my post again you will notice that I spoke about technological advances and know-how not the green revolution. Some people might spend money to educate people in 3rd world countries just because they are awesome persons, but corporations that operate factories also have to educate and bring know-how to their personnel in order to function properly.
The green revolution is the largest example of a sharing of technological advances and know-how. It occured pre globalization and has probably saved billions from starvation.
You need to do more than say that globalization has existed while the standard of living has increased. You need to isolate globalization.
Yup ,100% L. Thank you for communicating that more eloquently than I did. The point of my Gamestop analogy was not to show off the precise mechanics of economics, it was merely to illustrate in a very simple way for people NOT acquainted with economics, that the value-added process has been destroyed in America.
what value-added process? do you know what that means? you're talking about taxes and how taxes somehow make everyone poor and unsustainable. are you serious? your manipulation of numbers is astounding i don't know how you went from paying taxes to
The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.
but either you're a super mega genius or you have no idea what you are talking about.
I'm a super mega genius. The entire point was to illustrate that there was no point in that cycle that any value was ever added.
You're crying because you don't see where any value was added in that process. So, I accomplished my job. Wewt.
I'm not saying taxes make everyone poor and unsustainable. I'm saying capital leaves the retail industry in the form of taxes and salaries to corporate execs. If the Main Street labor market is dependent on growth in the retail industry, then it's a very shaky foundation, seeing as retail has these constant siphons to pull money out of the industry. AKA growth in the retail sector is unsustainable.
Normally, this would be curtailed by the interplay between the manufacture sector and the retail sector playing off each other. The more sales retail has, the more orders for the manufacture sector, back and forth etc. That's how growth emerges in both sectors.
But now the manufacturing sector has been exported to foreign nations. This symbiotic dynamic has been broken. There is nothing but a constant flight of capital away from Main Street. It's really a simple concept, but you're so busy trying to get indignant over my imprecise economics that you choose to bluster and screech instead of see the actual point. It's an analogy. It's not a precise model of exactly what's going on in the entire US economy with every single tax law and channel of capital flow being described. If I wanted to write that, I'd go get a PhD in economics as I'd have pretty much done all the work with none of the benefit.
you're assuming that the retailers lose money because manufacturers are being exported? there is no change in the dynamic here just because manufacturing has moved. more retail still = more manufacturing. people buy things, retail makes profit, manufacturer makes profit. sure, this takes away low skill labor but it creates labor as well because now there are more distribution and management issues to be handled. keeping manufacturing here would hurt retail far more as cost for labor would be so much higher raising price for goods.
But the distribution/management chains require far fewer people, whereas our population is growing with each generation. I see mechanization replacing human labor in the USA, but the people who lost those old manufacturing jobs are just not intelligent enough to find work in a society only interested in high skill labor. At best, the lower classes can become janitors, trash collectors, room service etc. And very few of these jobs are enough to sustain a family.
Traditionally, society relied on agriculture as a way for poorer, less educated people to sustain themselves. This was transferred in large part to manufacturing during the industrial era. But now in the computer age, many of the manufacturing jobs that were lost don't have a parallel to shift into. I'm not trying to be mean, but there are a significant number of people in the population with limited intellectual capacity. They can't really go become supply-chain managers, or financial officers, etc.
Maybe that is progress, but I see it as a source for future volatility as the lower-middle classes will feel increasingly resentful towards income stratification. A big part of USA's stability in the 20th century was the formation of a large middle class. We're now seeing that middle class disappear, and with it, that once stable core of American citizens.
what you are describing is what has happened before, is happening now, and will happen for all time. unskilled laborers becoming irrelevant, who'd have thought?
this, however, is a separate issue and really has nothing to do with globalization as it would happen regardless.
Structural unemployment has nothing to do with globalization? Hm, that's a new one.
And I disagree that this has happened before. We have not had a precedent where a sector as huge as agriculture or manufacturing was rendered obsolete with no sustainable, value-added industry to replace it. A service based economy that relies on consumerism just doesn't work in my opinion. It doesn't benefit Main Street. Modern nations need to come up with a good solution to employing their less-skilled citizens. This is not like 5-8% of the population. It's a majority of the population that is increasingly losing their jobs without a sustainable industry to be employed in.
When you take the military, agriculture, and manufacturing out of the equation as main sources of employment, as we are seeing machines take over these jobs more and more, it becomes a serious issue that modern capitalism needs to address. So far, the answer has been rampant consumerism so that people can be employed in retail or service sectors. My point the whole time has been that this is an unsustainable strategy, built on the backs of 3rd world labor (which will not be 3rd world forever), and leads to no real growth because all we've really built are shopping malls and overflowing landfills full of thrown away merchandise.
Look at what's considered the modern day savior in economics right now. The world is hoping that China's citizens will rise up and create such a ridiculous amount of demand for products that it will pull the rest of the world out of the doldrums. What kind of exit strategy from recession is that? Let's hope China joins in on the rampant consumerism so we find more people willing to blow all their money on unneeded luxury goods and we can keep this ball rolling?
I'm sorry but quality of life is not ipods, flat screens, and blackberries. Not when we're forced to work more hours, at more intellectually strenuous occupations, with higher stress levels, for less effective pay. That's not an increase in quality of life.
it's too bad a majority of jobs in the last two decades or more have been in the service industry. this is not going to change, at least it will not revert back to industrial labor. as production techniques improve there will be less and less need for manual labor and this is the fulcrum of the issue, not globalization. your argument is based on the assumption that we are still an industrialized nation and that moving away from this will cause the financial collapse of the middle class which is simply not true.
the world is hoping china creates demand because it is currently offsetting the balance of supply. if you have a country of however many hundreds of millions cranking out cheap products yet hardly have enough money to meet basic necessities much less purchase luxuries, you have a large imbalance of supply and demand. one of china's largest trading partner is the US and we are in a large trade deficit, ever wonder why? we are buying more from china than they are from us (among other countries).
quality of life is luxuries. that is assuming that the population is intelligent enough to know that luxuries come after necessities. a broke janitor making minimum wage barely making ends meet should not be buying a flatscreen, etc.
On January 28 2010 08:16 StRyKeR wrote: Many supposed "failures" of capitalism and the free-market are actually due to laws that stifle competition. In these cases, the failure is caused by a lack of a free-market.
A good example of this is health care. There is no inter-state competition. The entire system is a huge moral hazard, a giant cesspool of inefficiency where there is a back-office insurance agent doing paperwork for every two doctors. Think about the zero dollars you pay going to the dentist and all of that free tooth goodies you get even though you don't need it. SOMEONE is paying for that, whether it's the pool of monthly health care fees or the government. Looking at it backwards, YOU are paying for everyone else's health care. The doctors answer to the insurance companies and not the consumer. What is a free market in which the vendor is not held accountable to the consumer? If you had to pay for all those unnecessary goodies, would you still take them?
LASIK is currently not covered by many insurance companies. As a result, everywhere you'll see ads for "Get cheap LASIK for $xx.xx!" When there is healthy competition in which the consumer gets to choose what to pay for, not what the insurance companies choose to reimburse, prices go down and quality goes up. The terrible places go out of business and the good places compete with price, service, time, etc.
You know your claim that "Many supposed "failures" of capitalism and the free-market are actually due to laws that stifle competition." has been tried before. By Pinochet's economic advisers for instance. What happened when all the competition stifling laws were removed? Inflation soared, the gap between the rich and poor grew, the middle class disappeared and people starved.
I wish Sarkozy would jus stop... like... living... Everytime I see him it makes a little more bitter inside.
Part of key concept of globalization is not simply the "free trade" aspect of it that everyone thinks of when they think capitalism, but also the factor movement. It's not the idea that the Harvard student will compete directly with the Beijing University student, but rather they will pick up their comparable advantageous position and trade in this manner. The trade balance is an issue, but much of the ACTUAL problems with globalization is with factor movement (this concern many issues like developing countries, outsourcing, and wage balances)
When developing countries catch up in terms of technological advancement, certain parts of the labor process are directed there because of the comparative advantage and thus better profits. The natural order is that the developing country will catch up eventually and therefore gain more wealth by taking up more skilled ends of the labor spectrum. That is how a country DEVELOPS.
Take South Korea after the Korean War. Massive exports and specialization, with full government support of not only monopolies, but also streamline firms so that they can gain economies of scale easier and develop the infrastrure/technology they need. That is why South Korea got broadband when everyone was on Fisher Price modems.
In the US, what has happened is not a complete breakdown of the system, but rather the savings rate has been so low. The deficit is not simply from the government spending money like guys use water at a wet-shirt contest in the playboy mansion, but also the amount of borrowing and spending that the people has done to bloat the money supply. The money supply is what all these businesses grow on. When it becomes bloated, you have a plethora of businesses and could run fine during the bloated years, but once there is a contraction or a liquidity shock, they have no choice other than merge or consolidate.
I agree that the system needs to be regulated, but not in terms of trade and free market, but rather on the passage of information. The biggest challenge to capitalism, if you have taken ANY economics courses at all, is the lack of truthful information. (about the future, about the client, about the borrower, about the company)
I mean not to totally antagonize the OP here, but the explanation in the post lacks some serious ground work.
Oh god, this thread tilted me so much but when I read Boblion post from 06:48 I began to laugh out loud, seriously, that guy must be trolling?
It actually never stops to amaze that people who would never try to argue against science like biology or physics when they have NO FUCKING CLUE and basic theory knowledge, try to argue against economics.
On January 28 2010 05:36 Caller wrote: [quote] While this is true, L, his entire argument mentions nothing of externality, nor does it mention something about transactional costs either. It simply talks about taxes.
If you're insisting that transactional costs are a flaw, though, then by that argument no market system can ever be good because your outputs will never be 100% from your inputs. It's like the idea of a Carnot engine in chemistry-you will never have 100% efficiency with your heat engines because of the second law of thermodynamics and how entropy works. The transactional cost represents the difference of inputs to outputs.
I also like it when the OP proceeds to ignore my post and go to the next one.
That's not really true, because even if you don't have 100% efficiency, you can always have something other than a closed system; if you create wealth, then it can be destroyed by inefficiencies, but the onus would be on creating more wealth. If we take manufacturing to be the prototypical example of a clear value added process, we can see that MAKING STUFF GIVES YOU MONEY. If, however, the only thing you do is cyclically trade around retail goods, you simply run out over time.
The idea behind his statement is that the near complete collapse of manufacturing has stopped the input of wealth into the system, which is now spinning around in service industries being shaved down slowly.
On January 28 2010 05:40 REDBLUEGREEN wrote: [quote] If you read my post again you will notice that I spoke about technological advances and know-how not the green revolution. Some people might spend money to educate people in 3rd world countries just because they are awesome persons, but corporations that operate factories also have to educate and bring know-how to their personnel in order to function properly.
The green revolution is the largest example of a sharing of technological advances and know-how. It occured pre globalization and has probably saved billions from starvation.
You need to do more than say that globalization has existed while the standard of living has increased. You need to isolate globalization.
Yup ,100% L. Thank you for communicating that more eloquently than I did. The point of my Gamestop analogy was not to show off the precise mechanics of economics, it was merely to illustrate in a very simple way for people NOT acquainted with economics, that the value-added process has been destroyed in America.
what value-added process? do you know what that means? you're talking about taxes and how taxes somehow make everyone poor and unsustainable. are you serious? your manipulation of numbers is astounding i don't know how you went from paying taxes to
The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.
but either you're a super mega genius or you have no idea what you are talking about.
I'm a super mega genius. The entire point was to illustrate that there was no point in that cycle that any value was ever added.
You're crying because you don't see where any value was added in that process. So, I accomplished my job. Wewt.
I'm not saying taxes make everyone poor and unsustainable. I'm saying capital leaves the retail industry in the form of taxes and salaries to corporate execs. If the Main Street labor market is dependent on growth in the retail industry, then it's a very shaky foundation, seeing as retail has these constant siphons to pull money out of the industry. AKA growth in the retail sector is unsustainable.
Normally, this would be curtailed by the interplay between the manufacture sector and the retail sector playing off each other. The more sales retail has, the more orders for the manufacture sector, back and forth etc. That's how growth emerges in both sectors.
But now the manufacturing sector has been exported to foreign nations. This symbiotic dynamic has been broken. There is nothing but a constant flight of capital away from Main Street. It's really a simple concept, but you're so busy trying to get indignant over my imprecise economics that you choose to bluster and screech instead of see the actual point. It's an analogy. It's not a precise model of exactly what's going on in the entire US economy with every single tax law and channel of capital flow being described. If I wanted to write that, I'd go get a PhD in economics as I'd have pretty much done all the work with none of the benefit.
you're assuming that the retailers lose money because manufacturers are being exported? there is no change in the dynamic here just because manufacturing has moved. more retail still = more manufacturing. people buy things, retail makes profit, manufacturer makes profit. sure, this takes away low skill labor but it creates labor as well because now there are more distribution and management issues to be handled. keeping manufacturing here would hurt retail far more as cost for labor would be so much higher raising price for goods.
But the distribution/management chains require far fewer people, whereas our population is growing with each generation. I see mechanization replacing human labor in the USA, but the people who lost those old manufacturing jobs are just not intelligent enough to find work in a society only interested in high skill labor. At best, the lower classes can become janitors, trash collectors, room service etc. And very few of these jobs are enough to sustain a family.
Traditionally, society relied on agriculture as a way for poorer, less educated people to sustain themselves. This was transferred in large part to manufacturing during the industrial era. But now in the computer age, many of the manufacturing jobs that were lost don't have a parallel to shift into. I'm not trying to be mean, but there are a significant number of people in the population with limited intellectual capacity. They can't really go become supply-chain managers, or financial officers, etc.
Maybe that is progress, but I see it as a source for future volatility as the lower-middle classes will feel increasingly resentful towards income stratification. A big part of USA's stability in the 20th century was the formation of a large middle class. We're now seeing that middle class disappear, and with it, that once stable core of American citizens.
what you are describing is what has happened before, is happening now, and will happen for all time. unskilled laborers becoming irrelevant, who'd have thought?
this, however, is a separate issue and really has nothing to do with globalization as it would happen regardless.
Structural unemployment has nothing to do with globalization? Hm, that's a new one.
And I disagree that this has happened before. We have not had a precedent where a sector as huge as agriculture or manufacturing was rendered obsolete with no sustainable, value-added industry to replace it. A service based economy that relies on consumerism just doesn't work in my opinion. It doesn't benefit Main Street. Modern nations need to come up with a good solution to employing their less-skilled citizens. This is not like 5-8% of the population. It's a majority of the population that is increasingly losing their jobs without a sustainable industry to be employed in.
When you take the military, agriculture, and manufacturing out of the equation as main sources of employment, as we are seeing machines take over these jobs more and more, it becomes a serious issue that modern capitalism needs to address. So far, the answer has been rampant consumerism so that people can be employed in retail or service sectors. My point the whole time has been that this is an unsustainable strategy, built on the backs of 3rd world labor (which will not be 3rd world forever), and leads to no real growth because all we've really built are shopping malls and overflowing landfills full of thrown away merchandise.
Look at what's considered the modern day savior in economics right now. The world is hoping that China's citizens will rise up and create such a ridiculous amount of demand for products that it will pull the rest of the world out of the doldrums. What kind of exit strategy from recession is that? Let's hope China joins in on the rampant consumerism so we find more people willing to blow all their money on unneeded luxury goods and we can keep this ball rolling?
I'm sorry but quality of life is not ipods, flat screens, and blackberries. Not when we're forced to work more hours, at more intellectually strenuous occupations, with higher stress levels, for less effective pay. That's not an increase in quality of life.
it's too bad a majority of jobs in the last two decades or more have been in the service industry. this is not going to change, at least it will not revert back to industrial labor. as production techniques improve there will be less and less need for manual labor and this is the fulcrum of the issue, not globalization. your argument is based on the assumption that we are still an industrialized nation and that moving away from this will cause the financial collapse of the middle class which is simply not true.
the world is hoping china creates demand because it is currently offsetting the balance of supply. if you have a country of however many hundreds of millions cranking out cheap products yet hardly have enough money to meet basic necessities much less purchase luxuries, you have a large imbalance of supply and demand. one of china's largest trading partner is the US and we are in a large trade deficit, ever wonder why? we are buying more from china than they are from us (among other countries).
quality of life is luxuries. that is assuming that the population is intelligent enough to know that luxuries come after necessities. a broke janitor making minimum wage barely making ends meet should not be buying a flatscreen, etc.
You're right that the majority of jobs in the last two decades have been in the service industry. And that's exactly why we're seeing a massive spike in unemployment now. The lie was exposed. As soon as the overconsumption went down, all that supposed "growth" in jobs disappeared. It was driven by American consumption.
That level of consumption has now been shown to be untenable. People were relying on bubbles to fund their lifestyles. Scooping equity out of their homes to buy shit they didn't need. Now everyone's cutting back and suddenly a generation of workers have no jobs. And there's no foreseeable way to create enough jobs to absorb the unemployment. It is a critical issue when a third of the country is underemployed.
We are NOT an industrial country anymore. THe problem is we aren't anything now. I mean, what do we produce? Pharmaceuticals? Britney Spears? Video games? We're a country that creates some brilliant intellectual property, but that doesn't employ a nation. It is a serious issue, one that you will see grow worse over time as each generation enters the labor force and the percentage of them actually finding jobs decreases.
On January 28 2010 08:42 ondik wrote: Oh god, this thread tilted me so much but when I read Boblion post from 06:48 I began to laugh out loud, seriously, that guy must be trolling?
It actually never stops to amaze that people who would never try to argue against science like biology or physics when they have NO FUCKING CLUE and basic theory knowledge, try to argue against economics.
I don't want to educate you but i will give you an advice: you should read some stuff about epistemology and you could start with Karl Popper. If you don't see the difference between Human science and Biology or Physics i can't help you =) Btw i'm also studying eco but people thinking they know the truth because they have an eco degree make me laugh.
On January 28 2010 08:42 ondik wrote: Oh god, this thread tilted me so much but when I read Boblion post from 06:48 I began to laugh out loud, seriously, that guy must be trolling?
It actually never stops to amaze that people who would never try to argue against science like biology or physics when they have NO FUCKING CLUE and basic theory knowledge, try to argue against economics.
Whilst I agree with you there is a big difference between hard sciences such as biology and physics and the a social science such as economics.
On January 28 2010 05:42 L wrote: [quote] That's not really true, because even if you don't have 100% efficiency, you can always have something other than a closed system; if you create wealth, then it can be destroyed by inefficiencies, but the onus would be on creating more wealth. If we take manufacturing to be the prototypical example of a clear value added process, we can see that MAKING STUFF GIVES YOU MONEY. If, however, the only thing you do is cyclically trade around retail goods, you simply run out over time.
The idea behind his statement is that the near complete collapse of manufacturing has stopped the input of wealth into the system, which is now spinning around in service industries being shaved down slowly.
[quote]
The green revolution is the largest example of a sharing of technological advances and know-how. It occured pre globalization and has probably saved billions from starvation.
You need to do more than say that globalization has existed while the standard of living has increased. You need to isolate globalization.
Yup ,100% L. Thank you for communicating that more eloquently than I did. The point of my Gamestop analogy was not to show off the precise mechanics of economics, it was merely to illustrate in a very simple way for people NOT acquainted with economics, that the value-added process has been destroyed in America.
what value-added process? do you know what that means? you're talking about taxes and how taxes somehow make everyone poor and unsustainable. are you serious? your manipulation of numbers is astounding i don't know how you went from paying taxes to
The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.
but either you're a super mega genius or you have no idea what you are talking about.
I'm a super mega genius. The entire point was to illustrate that there was no point in that cycle that any value was ever added.
You're crying because you don't see where any value was added in that process. So, I accomplished my job. Wewt.
I'm not saying taxes make everyone poor and unsustainable. I'm saying capital leaves the retail industry in the form of taxes and salaries to corporate execs. If the Main Street labor market is dependent on growth in the retail industry, then it's a very shaky foundation, seeing as retail has these constant siphons to pull money out of the industry. AKA growth in the retail sector is unsustainable.
Normally, this would be curtailed by the interplay between the manufacture sector and the retail sector playing off each other. The more sales retail has, the more orders for the manufacture sector, back and forth etc. That's how growth emerges in both sectors.
But now the manufacturing sector has been exported to foreign nations. This symbiotic dynamic has been broken. There is nothing but a constant flight of capital away from Main Street. It's really a simple concept, but you're so busy trying to get indignant over my imprecise economics that you choose to bluster and screech instead of see the actual point. It's an analogy. It's not a precise model of exactly what's going on in the entire US economy with every single tax law and channel of capital flow being described. If I wanted to write that, I'd go get a PhD in economics as I'd have pretty much done all the work with none of the benefit.
you're assuming that the retailers lose money because manufacturers are being exported? there is no change in the dynamic here just because manufacturing has moved. more retail still = more manufacturing. people buy things, retail makes profit, manufacturer makes profit. sure, this takes away low skill labor but it creates labor as well because now there are more distribution and management issues to be handled. keeping manufacturing here would hurt retail far more as cost for labor would be so much higher raising price for goods.
But the distribution/management chains require far fewer people, whereas our population is growing with each generation. I see mechanization replacing human labor in the USA, but the people who lost those old manufacturing jobs are just not intelligent enough to find work in a society only interested in high skill labor. At best, the lower classes can become janitors, trash collectors, room service etc. And very few of these jobs are enough to sustain a family.
Traditionally, society relied on agriculture as a way for poorer, less educated people to sustain themselves. This was transferred in large part to manufacturing during the industrial era. But now in the computer age, many of the manufacturing jobs that were lost don't have a parallel to shift into. I'm not trying to be mean, but there are a significant number of people in the population with limited intellectual capacity. They can't really go become supply-chain managers, or financial officers, etc.
Maybe that is progress, but I see it as a source for future volatility as the lower-middle classes will feel increasingly resentful towards income stratification. A big part of USA's stability in the 20th century was the formation of a large middle class. We're now seeing that middle class disappear, and with it, that once stable core of American citizens.
what you are describing is what has happened before, is happening now, and will happen for all time. unskilled laborers becoming irrelevant, who'd have thought?
this, however, is a separate issue and really has nothing to do with globalization as it would happen regardless.
Structural unemployment has nothing to do with globalization? Hm, that's a new one.
And I disagree that this has happened before. We have not had a precedent where a sector as huge as agriculture or manufacturing was rendered obsolete with no sustainable, value-added industry to replace it. A service based economy that relies on consumerism just doesn't work in my opinion. It doesn't benefit Main Street. Modern nations need to come up with a good solution to employing their less-skilled citizens. This is not like 5-8% of the population. It's a majority of the population that is increasingly losing their jobs without a sustainable industry to be employed in.
When you take the military, agriculture, and manufacturing out of the equation as main sources of employment, as we are seeing machines take over these jobs more and more, it becomes a serious issue that modern capitalism needs to address. So far, the answer has been rampant consumerism so that people can be employed in retail or service sectors. My point the whole time has been that this is an unsustainable strategy, built on the backs of 3rd world labor (which will not be 3rd world forever), and leads to no real growth because all we've really built are shopping malls and overflowing landfills full of thrown away merchandise.
Look at what's considered the modern day savior in economics right now. The world is hoping that China's citizens will rise up and create such a ridiculous amount of demand for products that it will pull the rest of the world out of the doldrums. What kind of exit strategy from recession is that? Let's hope China joins in on the rampant consumerism so we find more people willing to blow all their money on unneeded luxury goods and we can keep this ball rolling?
I'm sorry but quality of life is not ipods, flat screens, and blackberries. Not when we're forced to work more hours, at more intellectually strenuous occupations, with higher stress levels, for less effective pay. That's not an increase in quality of life.
it's too bad a majority of jobs in the last two decades or more have been in the service industry. this is not going to change, at least it will not revert back to industrial labor. as production techniques improve there will be less and less need for manual labor and this is the fulcrum of the issue, not globalization. your argument is based on the assumption that we are still an industrialized nation and that moving away from this will cause the financial collapse of the middle class which is simply not true.
the world is hoping china creates demand because it is currently offsetting the balance of supply. if you have a country of however many hundreds of millions cranking out cheap products yet hardly have enough money to meet basic necessities much less purchase luxuries, you have a large imbalance of supply and demand. one of china's largest trading partner is the US and we are in a large trade deficit, ever wonder why? we are buying more from china than they are from us (among other countries).
quality of life is luxuries. that is assuming that the population is intelligent enough to know that luxuries come after necessities. a broke janitor making minimum wage barely making ends meet should not be buying a flatscreen, etc.
You're right that the majority of jobs in the last two decades have been in the service industry. And that's exactly why we're seeing a massive spike in unemployment now. The lie was exposed. As soon as the overconsumption went down, all that supposed "growth" in jobs disappeared. It was driven by American consumption.
That level of consumption has now been shown to be untenable. People were relying on bubbles to fund their lifestyles. Scooping equity out of their homes to buy shit they didn't need. Now everyone's cutting back and suddenly a generation of workers have no jobs. And there's no foreseeable way to create enough jobs to absorb the unemployment. It is a critical issue when a third of the country is underemployed.
We are NOT an industrial country anymore. THe problem is we aren't anything now. I mean, what do we produce? Pharmaceuticals? Britney Spears? Video games? We're a country that creates some brilliant intellectual property, but that doesn't employ a nation. It is a serious issue, one that you will see grow worse over time as each generation enters the labor force and the percentage of them actually finding jobs decreases.
Solution: Go to war again. Build tanks, friendly predator missiles and work for blackwater.
On January 28 2010 08:41 Creationism wrote: I wish Sarkozy would jus stop... like... living... Everytime I see him it makes a little more bitter inside.
Part of key concept of globalization is not simply the "free trade" aspect of it that everyone thinks of when they think capitalism, but also the factor movement. It's not the idea that the Harvard student will compete directly with the Beijing University student, but rather they will pick up their comparable advantageous position and trade in this manner. The trade balance is an issue, but much of the ACTUAL problems with globalization is with factor movement (this concern many issues like developing countries, outsourcing, and wage balances)
When developing countries catch up in terms of technological advancement, certain parts of the labor process are directed there because of the comparative advantage and thus better profits. The natural order is that the developing country will catch up eventually and therefore gain more wealth by taking up more skilled ends of the labor spectrum. That is how a country DEVELOPS.
Take South Korea after the Korean War. Massive exports and specialization, with full government support of not only monopolies, but also streamline firms so that they can gain economies of scale easier and develop the infrastrure/technology they need. That is why South Korea got broadband when everyone was on Fisher Price modems.
In the US, what has happened is not a complete breakdown of the system, but rather the savings rate has been so low. The deficit is not simply from the government spending money like guys use water at a wet-shirt contest in the playboy mansion, but also the amount of borrowing and spending that the people has done to bloat the money supply. The money supply is what all these businesses grow on. When it becomes bloated, you have a plethora of businesses and could run fine during the bloated years, but once there is a contraction or a liquidity shock, they have no choice other than merge or consolidate.
I agree that the system needs to be regulated, but not in terms of trade and free market, but rather on the passage of information. The biggest challenge to capitalism, if you have taken ANY economics courses at all, is the lack of truthful information. (about the future, about the client, about the borrower, about the company)
I mean not to totally antagonize the OP here, but the explanation in the post lacks some serious ground work.
My problem with asymmetrical information is that a lot of people even with the info will not make a smart decision. You ever tried to walk into a Walmart and start telling people why the products in their cart are bad for them, are not worth the money, etc? How do you think that would turn out?
I've insisted this repeatedly. The majority of humanity is not that clever. Giving them perfect info won't mean much when their intellect can't even compute the information. Asymmetrical info as a problem is one of those theories bandied about by academics, yet has very little application in the real world. The academics forget that the average person can be rather stupid.
What is a serious problem for the middle-lower classes is not their access to information. Rather, it's the simple fact that they need jobs they are capable of working and need wages that can support a decent quality of life.
And they need regulation by the government to guide them into doing things that are beneficial for themselves. Because, sorry, people are NOT perfectly rational beings. And while they are selfish, they do not always do what is in their best interests. Even if they have the information needed to make a correct decision in front of them.
There are plenty of people who know getting a college degree is pretty important. They've got the info in their faces 24/7. They still drop out. I think most people know heroin and cocaine are bad drugs. People still shoot and snort.
I will try to show you concrete case what is one of the problems trend in economy: I work in a big company (owner between 10 richest people in the world)
Small regional (czech) production company was bought 2 years ago by this big global company. That small company was doing good in our market and was sold with a huge profit for the owner. Now after 2 years the big company decided that they will close regional production in order to decrease cost and will be importing goods from our subsidiary from Slovakia. The same happened in Hungary and other European countries. So we stay in the local market, but the production line is not there anymore. We had a small manufactory here in czech but still about 80 people lost their job due to this purchase.
When the company was small czech company, everyone was happy there and people had jobs. This case is describing very small number of people, but i think that this is going on in more places with a lot bigger number of people involved.
We can't really do anything about this trend, but it is really taking job opportunity away from people. Sure this huge global company still providing many job opportunities around the world. Our company has about 300 000 employees, but still 80 people lost their job in my country. If you look at it, there are many cases like this in my country (small regional company sold > poeple losing job). Thanks to this, overall people in my country losing job opportunities and if that is the trend, it is not good at all.
This case is not that hardcore as the clothing industry. Almost all clothing nowadays is made in poor countries. Yes it gives the job opportunity to people there but the wage is very minimum. So you have people in advanced countries losing jobs in exchange for people in poor countries get jobs that are minimum payed and are still poor. Outcome is more poor people around the world.
This is one of the bad influences of globalization and capitalism. I am not against capitalism and free trade market, I just wanted to describe how it influences the world. It is still the way which gives people the most freedom than anything else.
I would like to add that i am really curious how will people cope with the problem of increasing technology level. Today and in the future, there will be more and more machines, computers and robots doing people's work and less job opportunities due to both these trends i have described > more poor people again. Sure if you are smart and educated person, you will always find your place, but everyone can't be smart and educated and if everyone will be in the future, there won't be enough opportunities for everyone anyway......Under any circumstances the future is scary (i didn't mean to detrail this thread, but i was just writing and writing. Sorry about that)
The only issue with the current system to me is that the division of wealth has not been really at all balanced by the irs in the past 30 years taxing the rich has become less and less of an ability and a stronger reliance in getting the money when people die at least in the US. So we get the filthy rich and really poor in the US with a getting by middle class. That's my only complaint.
On January 28 2010 08:56 Virtue wrote: The only issue with the current system to me is that the division of wealth has not been really at all balanced by the irs in the past 30 years taxing the rich has become less and less of an ability and a stronger reliance in getting the money when people die at least in the US. So we get the filthy rich and really poor in the US with a getting by middle class. That's my only complaint.
You're only complaint is that the current system causes massive inequality and unemployment then. Fair enough.
On January 28 2010 08:41 Creationism wrote: I wish Sarkozy would jus stop... like... living... Everytime I see him it makes a little more bitter inside.
Part of key concept of globalization is not simply the "free trade" aspect of it that everyone thinks of when they think capitalism, but also the factor movement. It's not the idea that the Harvard student will compete directly with the Beijing University student, but rather they will pick up their comparable advantageous position and trade in this manner. The trade balance is an issue, but much of the ACTUAL problems with globalization is with factor movement (this concern many issues like developing countries, outsourcing, and wage balances)
When developing countries catch up in terms of technological advancement, certain parts of the labor process are directed there because of the comparative advantage and thus better profits. The natural order is that the developing country will catch up eventually and therefore gain more wealth by taking up more skilled ends of the labor spectrum. That is how a country DEVELOPS.
Take South Korea after the Korean War. Massive exports and specialization, with full government support of not only monopolies, but also streamline firms so that they can gain economies of scale easier and develop the infrastrure/technology they need. That is why South Korea got broadband when everyone was on Fisher Price modems.
In the US, what has happened is not a complete breakdown of the system, but rather the savings rate has been so low. The deficit is not simply from the government spending money like guys use water at a wet-shirt contest in the playboy mansion, but also the amount of borrowing and spending that the people has done to bloat the money supply. The money supply is what all these businesses grow on. When it becomes bloated, you have a plethora of businesses and could run fine during the bloated years, but once there is a contraction or a liquidity shock, they have no choice other than merge or consolidate.
I agree that the system needs to be regulated, but not in terms of trade and free market, but rather on the passage of information. The biggest challenge to capitalism, if you have taken ANY economics courses at all, is the lack of truthful information. (about the future, about the client, about the borrower, about the company)
I mean not to totally antagonize the OP here, but the explanation in the post lacks some serious ground work.
My problem with asymmetrical information is that a lot of people even with the info will not make a smart decision. You ever tried to walk into a Walmart and start telling people why the products in their cart are bad for them, are not worth the money, etc? How do you think that would turn out?
I've insisted this repeatedly. The majority of humanity is not that clever. Giving them perfect info won't mean much when their intellect can't even compute the information. Asymmetrical info as a problem is one of those theories bandied about by academics, yet has very little application in the real world. The academics forget that the average person can be rather stupid.
What is a serious problem for the middle-lower classes is not their access to information. Rather, it's the simple fact that they need jobs they are capable of working and need wages that can support a decent quality of life.
And they need regulation by the government to guide them into doing things that are beneficial for themselves. Because, sorry, people are NOT perfectly rational beings. And while they are selfish, they do not always do what is in their best interests. Even if they have the information needed to make a correct decision in front of them.
There are plenty of people who know getting a college degree is pretty important. They've got the info in their faces 24/7. They still drop out. I think most people know heroin and cocaine are bad drugs. People still shoot and snort.
Leaving the druggies out of it (not general population), I agree that the general population is stupid (read my sig, i think we see eye to eye here). But I think we disagree to what is actually real economic information. It's not something like telling people in WalMart why a OreO would kill them (which actually.... class action lawsuit i believe?), but rather that they will live 10 years less if they buy this crap. Or the full economic impact of going to college. If you told an average person that he will make (whats the average salary in the US, dont wanna google it) after 4 years of college instead of his shitty $10/hr job, you really dont think hed do it? (minus the tuition n what not of course)
The rational being we're talking about here is a person who value what gives him more pleasure, as simple as getting laid once a day or twice a day. He spends more energy, but he gets a lot of pleasure out of it. Eventually you will meet a guy whos so lazy that he would forgo the pleasure to save that energy, but even he is rational utility wise. From a God's Eye view, yes, people will not do whats best for them even given ENOUGH information to pick the best choice, simply because they cannot process the information. But that rationality is different from the "rational consumer" we speak of in economics. The "real world" rationality is the ability to make logical steps to arrive at a conclusion, some people can't do that. But I mean if he REALLY had all the information, he would make the rational choice.
The job situation now I believe is a result of the factor movement to basically all overseas over these last couple years. This not completely the fault of capitalism, but the lack of regulation on the factors section of the market, which it really seems no one cares about. Regulations such as the transfer of labor to overseas while still maintaining a ratio of workers here in the US might have come up a few years ago, not quite sure on that now... saw it a while ago. But taxing corporations that have effectly moved sectors overseas as a foreign unit would fix the problem instantly. But I guess you're right about how you'd have to be Moses to pass that bill.
I always thought it was self evident that the free market uses the invisible hand to sodomize the citizens. Just look at whats happening over in Iraq. You're next NORWAY!
First, Hi! I have followed the TeamLiquid forums for a while now, but have thus far avoided posting. This thread, however, merits special attention.
It's a provocative title I know. But it's exactly what I want to debate.
Not just because the opening post is lacking in specificity and riddled with errors, but also because the majority of responses have been mere echoes of assent. Its a provocative opening, I know. But it’s exactly what I want to debate.
FIERCELY.
Good.
To start things off I'd like to open with the latest address by President Sarkozy of France: Globalization Got Out of Control
It’s difficult to believe that one would ever see an argument in favor of globalization and capitalism coming out from Sarkozy. Over the last few decades, France has seen significant cultural, social, and economic unrest among its population due to increasing number of immigrants, particularly those from Eastern Europe and the Middle East. I suspect if Sarkozy was seen to be advocating for greater globalization, he would soon be out of a job. This isn’t to say that his points should be discounted, but rather just that one should recognize his likely biases.
Now, the way I see it, what's currently taught in economics and finance classes in America is this concept of globalization, free market, capitalism, and less taxes/regulation = increased economic prosperity.
I want to go ahead and say that's crap.
And I’m going to go ahead and say that you’re wrong. (This isn’t meant to spark a flame-war, but rather to announce my intention to debate the rest of your post)
To begin, you will need to be a little more specific in your terminology. What do you mean when you say “free-market”, and less “taxes and regulation”? Are you talking about capital gains taxes, income taxes, or taxes in general? Do you mean less regulation on business? Or less regulation on capital and labor flows? One last point on this paragraph, and that is to say, as written, it is mostly correct. However, it should be noted that the predicted increase in economic prosperity is never immediate, nor does it imply that there will not be losers among certain segments of the population. Rather, increased economic prosperity is viewed in the aggregate, or the sum of the entire population.
First, one of the central tenets of modern capitalism is this concept that the "free" market leads to benefit for everyone. They think that things naturally move to an equilibrium in demand/supply/price if left alone. The rationale for this is that people, with enough info, are perfectly rational beings that make the best choices
.
This is true if one is considering only the most basic or unrealistic economic models. I’m not entirely sure what you mean by “if left alone”, but I’ll take it to mean zero regulation, no taxes, and complete freedom in the movement of capital and labor. Also, I think you will find that every market, no matter how regulated or restricted, reaches some kind of equilibrium. I think what you meant to say is that economists believe the market will reach a perfectly competitive equilibrium, where you have many identical firms producing a given good at where price is equal to marginal cost.
While some models do predict a perfectly competitive equilibrium from these things (and often only because they simply don’t include measures of them), I don’t think you could find a serious economist who believes such an equilibrium would result. As an aside, that kind of world is essentially anarchistic, and it is difficult to imagine any sort of nation-state even existing, let alone trading.
The problem with this theory is it doesn't account for the destructiveness of monopolies
.
Which theory? Please be more specific. There are many economic models which do, in fact, account for the “destructiveness” of monopolies. Some kinds of monopolies also argue against your belief that economists always believe less regulation is a good thing. There are many situations where a regulated monopoly is the most desirable option. Any industry with high fixed costs and low marginal costs is well suited to allowing such a monopoly to exist, such as electric companies and telephone companies. (Imagine if there were many electric companies, and each had to lay their own power lines!) You are right that such monopolies could be “destructive” if they weren’t regulated, but my point here is that even “free market” economists see the value in certain kinds of regulation.
In business, anytime a group has either grown or merged into a large enough economic body, they can start to implement destructive strategies like dumping a ton of their products at a very cheap price onto a foreign market and wrecking the local competition. This is validated by capitalism and the free market because this is merely a strategy to increase market share, and if they have the resources to engage in such an act, then they have every right to. Over the span of a few years, this group demolishes the local competition and creates a monopoly. Then they jack up the prices a ton and win back all the profits they gave up with this strategy. Except once they've recouped their investment, they continue to do it perpetually. This is a win-lose scenario. Yet, it's an example of what happens on the "free" market. This doesn't lead to constant competition and cheaper prices/higher quality for everyone. This leads to a stagnant market where one giant is in control and sells at exorbitant prices because they are the controllers of all supply.
I’ll begin by saying that many countries do indeed have anti-dumping laws to protect against just that. But such laws are foolhardy. Your assessment lumps together two distinct kinds of dumping.
The situation you’re describing is one in which a company prices their goods such that price is less than marginal cost, meaning they take a loss on every item sold (a.k.a. several recent game consoles). Such maneuvers can often result in other companies being forced out (note, however, that this is not limited to international competition). However, such behavior is not economically viable in the long run. As you say, prices must eventually go up. The extent to which people are willing to pay premiums above which they originally paid however, is limited by the elasticity of demand for that good. No one is going to pay $12 for a nail when they can buy a screw instead for $.01. Furthermore, once the company raises prices to above price equals marginal cost, it opens the door for competition to once again enter the market.
The second situation is one in which the company prices their goods below the prices of other similar goods in the area, but at a price above marginal cost. This is a perfect example of specialization. If one company or country can make a profit by selling their goods at a lower price than another, then that company or country should specialize in the making of that good. Certainly, there will be some negative elements involved, such as workers of the higher-priced company being laid off, but the net gain to society more than compensates for that loss. Although this gain is most often considered in terms of lower prices, consider that lower prices result in increased profits of other companies, allowing them to expand and create new jobs.
In capitalism, it's theorized that the only way to combat this is for another giant group to emerge. Yet, this sort of competition doesn't help at all. While the two giants are growing, they experience economies of scale and their efficiency increases. Yet, once they reach a certain size, they start to experience the DISeconomies of scale from being too bloated. But they have to continue this arms race, because if they try to scale back, the other one will have the advantage in buying power for that short window of time and can steal more market share, thus perpetuating an advantage until the guy who stepped back first is destroyed.
What? This sounds like something you didn’t think through properly. Did you have a specific example in mind here? What does it mean to have “an advantage in buying power”? What do you mean by “scale back”? I also think you are confused about the nature and importance of market share. For the sake of argument, however, this is how I will take this paragraph: Both companies are too large. Thus, the price of their goods has risen (due to operating inefficiencies perhaps). One company recognizes this, and reins in their production (perhaps closing several production plants or store outlets). The other does not. By not doing so, the inefficient company gains an advantage over the efficient company (perhaps because they have more production plants relative to the other company now), and uses that inefficiency to eliminate the other company. The problem with that is that the first company is, by definition, inefficient. It cannot gain an advantage over the other company. How could it? The other company will produce the same good, but for a lower price. I think perhaps you believe market share to exhibit some kind of snowball effect, whereby once you achieve the largest market share, then you automatically eliminate the competition. Perhaps I have misunderstood you, but such behavior is not predicted in economic theory, nor is it seen in the real world. In the case you described, the inefficient company has no choice but to follow suit.
This creates an effect where giants are constantly forced to grow bigger to compete
This is misattributing cause and effect. Companies don’t grow bigger so that they can compete, companies grow bigger because they are competitive. Walmart didn’t just decide to become a national chain so that they could be competitive. They became a national chain because they were competitive. At the risk of being too repetitive, companies rarely ever grow bigger unless they are efficient.
even though in the long run it leads to a net loss in efficiency. This is what the free market creates.
My previous statement makes this false. The most successful companies are the most efficient. This makes intuitive sense. You don’t see large, successful companies that are inefficient. (Unless you count the US government as successful, but that’s beside the point )
The problems with this are obvious. This is why countries have effected protectionist policies to defend against these sorts of aggressive economic strategies. Then you no longer have a free market. It becomes mixed. Our world is full of mixed economies.
Since your earlier statements were not true, the problems with this are not obvious (sorry if this seems too confrontational, it is the way my mind proceeds when I attempt to make an argument). You are right that countries have created protectionist policies to defend against domestic problems resulting from international trade. But those policies are always misguided. Why do they create them? Because the advantages gained from trade are much more difficult to see than the losses. A reduction in the price of nails from $.02 to $.01 as a result of trade saves millions, if not billions, of dollars per year. But no single company sees that entire picture. But the workers in the U.S. who make nails and got laid off are highly visible. They write to their congressional delegation. They appear in the newspaper and on television. Yet the sum of their wages might not even total a million dollars per year. Even though the net gain is much higher, it is not as noticeable.
The last 30 years of economics in the USA and the world, is a constant attempt to try to bring down these protectionist strategies on the belief that free market was more efficient and beneficial for all. Peep the giant economic collapse we just had. It's pretty obvious to everyone now that this free market liberalization was a horrible idea. It destroyed local industries, it gutted nations, it destroyed whole swathes of industry in nations, and all it really did was lower the retail prices of goods.
As another previous post said, this seems like nothing more than a populist outcry. Blaming the economic collapse on efforts to bring down protectionist barriers does not make sense. I fail to see how trade tariffs, immigration restrictions, and limits on international capital flows have anything to do with banking regulation. Capital flows and capital gains taxation are in the realm of banking, but are not themselves causal agents in the collapse.
What use are lower prices when you don't have a job?
They make your food stamps and unemployment insurance stretch a lot further.
That's the problem with the concept of free market. It's too focused on price of goods as a barometer for efficiency. It fails to address the issues of labor and wages. Now if you try to approach the labor market using capitalist and free market principles, you end up with sweatshops in China and India.
I think the price of goods is an excellent barometer for efficiency. While I believe using it as a measure does neglect many important other things, such as happiness or environmental concerns, the one aspect it does excel at is to provide a measure for labor and wages. Wages mean nothing with a price to compare them to. $1 a day will buy one nothing now, but 100 years ago? Similarly, a wage is nothing more than the price of labor. Perhaps you meant that the focus of companies on the price of goods prevents them from paying adequate attention to the needs of their workers. (I think this is, after rereading your paragraph, how you meant it). Sweatshops are an oft-cited example of “evil corporations” that exploit people. I typically associate this kind of statement with people who have never been outside of first-world countries, or experienced true poverty. Not poverty as defined by the US ($22,000 for a family of four), but poverty of the kind where people earn less than a $1 a day. In such situations, a job at a sweatshop is almost a miracle. The alternative to such jobs in poor countries is frequently to not know if or when you will eat again. People living in developed countries often forget how terrible situations can be elsewhere. A common counter-argument to this is “Well, why don’t companies just pay them as much as they pay their American workers?” There are many answers to this. The best is probably that the labor pool is just too large. The United States makes up a but a tiny fraction of the world’s population. For every child in Egypt making shoes for $2 a day, there are a hundred more who would be willing and happy to do it for $1 a day. A second is that, if they did, there would be no incentive to hire workers abroad. All it would do is increase the costs of their goods, as they would need to be shipped further.
Does anyone honestly think it is a good thing to compete with sweatshop workers in terms of pay/productivity?
There is a reason manufacturing industries are declining in the United States. Does anyone honestly think this is a bad thing? American wages have been increasingly consistently over the last...250 years. Unemployment has stayed all but constant, and far lower than almost any other country on the planet. This suggests that the positive effects from structural changes in the economy, such as the shift from a manufacturing based economy to service based economy, far outweigh the negative.
There is a common story told about such shifts: Everyone used to worry that robots would take over all of the manufacturing jobs, and then there would be massive unemployment. Except, when the robots took over, the unemployment spike didn’t happen. Why? Because people were needed to build, operate, and maintain the robots.
Countries specialize in the things they are best at. The United States used to be among the best manufacturers in the world. So there were many manufacturing jobs. Now, as our standard of living, our productivity, and educational attainment have all increased, we are no longer the best at manufacturing. We still might be able to produce more per person than another country if we focused on manufacturing, due to our infrastructure and technology, but what would be the point? Instead, we move onward and upward into a service-based economy.
There is only one real way to improve labor's market value, which is training that improves their productivity. Yet, the sad truth of the matter is that even with a great education, a large proportion of the population is not that clever. They can't really be trained that far past the level of a sweatshop worker. This is what's traditionally known as "retail sector" or "blue collar."
The first sentence is more or less correct, though it neglects the role of technology. I agree that the intelligence of the average person of the United States is “not that clever”. But, again, go outside of the first-world. The literacy rate in the US is close to 100%, and almost every student attends some high school. While poor countries have made great strides in recent years (thanks to globalization. . .), almost 100 still have literacy rates below 80%.
This makes up a pretty large percentage of the world population. Yet, the blue collar workers in America don't want to work in sweat shop conditions. Capitalism and the free market tells us that the smart thing to do is just tell those blue collar workers to fuck off and move the factories to China.
And this is a problem because? I understand that, given the current unemployment rate, and given how the recession has disproportionately effected men in manufacturing, that such a response seems callous. That’s because it is, in the short term.
This is why you see an increasing wealth disparity between the rich and poor in America. The poor have lost their jobs to the increasingly "free" labor market,
Is it? Does $30,000 a year for a factory worker job narrow the wealth disparity between the rich and the poor? No, it does not.
whereas the rich and intelligent Americans have increased their value because they have some of the world's best education, coupled with some of the world's best tools of production
.
I don’t argue with this.
AKA, the American factory worker must compete with the Chinese sweat shop worker.
I just want to point out here that the standard of living and the wage level for all income groups has being increasing in America since its founding. It isn’t that the poor are getting poorer and the rich richer, it is that the rich are getting richer faster than the poor are getting richer.
The American Harvard graduate competes with the Chinese Beijing University graduate. Except the Harvard graduate gets to enter an organization like Goldman Sachs, with some of the world's best financial algorithms and the best financing and the best connections.
I think you meant: The American Harvard graduate competes with the Chinese Harvard graduate. And that is one the best thing about having less protectionism. With more freedom of movement for labor and capital, the best and brightest in other countries are allowed to make use of the top schools in the world.
Therefore, while the free market has allowed the Harvard graduate to reach greater and greater heights by reaching the pinnacle of the financial world and reaping the benefits of competing vs the world due to massive, built-in advantages, the American factory worker has been laid off and can't find another job because he/she is now competing versus the 5 billion people of the developing world.
Right. But again, this is a short term loss for a much greater long term gain. Think about the industrial revolution. It was essentially the same, except that instead of services replacing manufacturing, manufacturing replaced agriculture. Does anyone (other than dirty hippies) think America is worse off for having undergone that transformation?
Do you guys see now why the free market is not helping the vast majority of America?
To go back to the linkage between prices and wages: you don’t see how it is helping because you simply don’t notice it. When you go grocery shopping, do you stop to think, “My grocery bill this week was $100 less this week because of free trade”? Free trade results in a purchasing power increase of tens-of-thousands of dollars every year for each and every person in the United States. That is not an exaggeration. Consider how many goods you buy every year, and then realize that anything not made in the United States is cheaper than it would be otherwise. Even goods made in the United States, such as strawberries from California, are cheaper because they have to compete with Mexico. And, if that’s not enough, consider that you even have the option to buy strawberries in January. All because of free trade.
And if you look at the labor markets, the greatest shift has been away from manufacturing and towards retail. Yet it's a nonsensical shift. How does it make any sense when the retail industry is driven by consumption, and the consumption is paid for by wages from the retail industry?
Are you asking how can goods continue to be produced in a country if no one is actually making goods?
This is like saying, I get a job at Gamestop. Then I buy a ton of games from Gamestop. Eventually, Gamestop will expand because I'm buying so many games with my wages from them, that Gamestop's sales will be enough to expand.
It makes no sense. Money is constantly being pulled OUT of the economy this way. Every time you put $50 through the system, you end up with less. First, I get the job at Gamestop. They pay me $50. Yet, I pay income tax on that $50. It then becomes $42.
This $42 is then spent to buy a game. Yet I need to supplement it with another $8 from somewhere. So, already I'm at -$8. Okay, $50 + tax = $53. Now I'm at -$11.
Then Gamestop gets their $50 and has to pay corporate tax on it. So they're down to what? $40? A net of $-21 for a single transaction between retail to employee and back to retail.
So, in every transaction of $50 of wages going out of the system, we end up with only $29 of it going back in. It's rather obvious that the US labor/wage market can not be sustained by this type of relationship.
I don’t really know what to make of this. It almost seems like you see tax money as being removed from the system.
The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.
It is not a zero-sum game.
The reason is because the tax dollars are being siphoned off. That $21 that was taken out is given to the government.
Right. You do see taxed dollars as just vanishing. Let me redo your gamestop example (keeping it simple):
You work at gamestop. You get paid $100. Income tax takes 20%. You now have $80. You buy a game for $50, with $5 of sales tax. Now, gamestop has -$50 (the game – your income). You have $25. The government has $25. The government uses that $25 to buy concrete an pay a worker to repair the pothole in your street. Now that worker has $25. Now he buys a game from gamestop. Which fuels your next paycheck.
Economies are vast. Money changes hands very frequently. Money doesn’t just disappear from the system.
Yet, the government we have today is increasingly controlled by corporations. According to current moral and economic philosophy, like that espoused by Jibba and others on TL, it's perfectly okay and constitutional for a corporation to get involved with government. On top of that, morals have no place in economic decisions. Therefore, it is completely okay for a corporation to try to pay to get laws passed that benefit the corporation.
This reads like a conspiracy theory website. I can’t argue that corporations don’t heavily influence politics. But, two points to consider: first, the United States has one of the highest capital gains tax rates in the world. This is extremely detrimental to business. Second, income tax is progressive. Larger corporations pay more in taxes. One would think that, if corporations really had significant influence, these items in particular would be among the first to change.
What this means is that those $21 instead of going back into an industry that benefits the lower classes could be funneled into an industry that doesn't support hardly any of the middle-lower classes. Such as the banking industry! So, not only is the middle class losing jobs, competing with a vast number of foreign competitors, but they lose nearly half of every dollar to that mfing Harvard graduate. Because he/she is busy wheeling and dealing, screwed a bunch of people over with greedy "capitalist" ploys, and then needed a bailout.
I realize that writing quality goes down the longer one writes (witness my own comments), but there really isn’t anything of substance in here. I guess I’ll just point out recent income tax statistics: (google IRS summary of Federal Individual Income Tax Data 2007 or 2008 for source) In 2007, The top 1% of income earners paid 40% of total income tax. The top 50% of income earners paid 97% of total income tax. In other words, of that $21 dollars in taxes, $20.50 of it came from the wealthy. I find it hard to make an argument that taxation is hurting the poor.
This is how Main Street gets shafted.
On top of that, to the people who claim that of course the solution to all this is just get rid of taxes, I ask the question, ok, then where is the growth?
Sure, without taxes the $50 between me and Gamestop is cycled back and forth. Yet, that $50 will never grow. It remains $50. Therefore, even in the most ideal of circumstances, the money is not lost, it only remains the SAME. ZERO growth.
In fact, accounting for inflation, you'd still see a loss of $1-2 each year. The industry continues to lose in a perfectly ideal situation. This is why the concept of consumer-based society leading to growth is total bullshit. You cannot grow an economy by spending money. That doesn't work.
We don’t have a consumer based economy. We are moving toward a service based economy.
The only way to grow the economic pie is technological innovation which decreases the cost of production. This way, I spend $50, Gamestop gets their $50 back. Yet, they have factories/studios that can produce the game for only $5. Therefore, they pay me $50, I buy from them for $50, they get back $45. They can then afford to make 9 more games. With 9 more games, they can make enough money back to hire 8 more workers. This way the loop continues.
Except somewhere in the loop, the business decides that instead, they're just going to pay all those profits to the CEO. We don't need to increase that many jobs. We'll just give it to the top guys. Therefore, once again the middle and lower classes are powerless to stop the flight of money from the consumer-supplier loop.
Technological innovation is certainly a good thing. It reduces prices. But so does shifting labor to another country. Perhaps another example: Say they fire you because they don’t need you making the game anymore, because they hired a worker in another country. Since they can now make games cheaper, they make more profit, enabling them to expand. You get rehired as architect to design their new buildings. Now instead of being in manufacturing, you’re an architect. (Think about this on a national level, not on an individual level)
In pretty much every way, using capitalist and free market principles leads to a loss for the middle and lower classes. This is why Sarkozy says capitalism needs to be refounded to be more moral. That finance, free trade, and competition are a MEANS not an end. And it needs to be redefined and reinvented.
Remember what I said about Sarkozy’s likely biases and political pressures?
It's because morons run around trying to claim that the free market leads to increased efficiency and prosperity for all as long as everyone just makes decisions in a totally selfish manner. It doesn't. It doesn't work. The past 30 years have shown it doesn't work. It's led to disaster. The globalization and free market proponents were wrong. They did nothing but justify selfishness as a good thing.
There isn’t really anything to respond to here. I would be happy to argue with you some more, if you would like. You said you were familiar with economic concepts in a previous post. Maybe we can break out our favorite international macro or international trade models.
I got to here and figured I should throw a point of interest out:
Any industry with high fixed costs and low marginal costs is well suited to allowing such a monopoly to exist, such as electric companies and telephone companies. (Imagine if there were many electric companies, and each had to lay their own power lines!)
Look up the war of the currents. That's exactly what Edison wanted to do, as long as he owned all of said electric companies.
Additionally, look at the intense propaganda campaign he used to try and justify his clearly shitty plan; its got a number of modern day equivalents.
On January 28 2010 09:25 ZeroJumps wrote: This reads like a conspiracy theory website. I can’t argue that corporations don’t heavily influence politics. But, two points to consider: first, the United States has one of the highest capital gains tax rates in the world. This is extremely detrimental to business. Second, income tax is progressive. Larger corporations pay more in taxes. One would think that, if corporations really had significant influence, these items in particular would be among the first to change.
You're saying you know corporations heavily influence politics, but it's not significant? It's a conspiracy theory to suggest otherwise presumably.
Taxation laws in the US are incredibly difficult to change, so the corporations pick their battles. They ensure that their interests are served abroad ( 'unfriendly' governments being overthrown in US backed military coups) that their particular company gets nice juicy contracts (haliburton under Bush for example) and that environmental regulation, indeed regulation in general, is blocked somewhere along the line.
EDIT: yarders... can you spoiler that shit? We don't need it twice on one page.
Yeah, capitalism is flawed. No other system of exchanging labor for goods has ever been created that does a better job than capitalism though.
All that you are doing is complaining about something that has problems, but gets the job done. This is the same as saying that we should cut people's hearts out because they have heart attacks. Sure they fail sometimes, but it's better than nothing.
You're saying you know corporations heavily influence politics, but it's not significant? It's a conspiracy theory to suggest otherwise presumably.
Taxation laws in the US are incredibly difficult to change, so the corporations pick their battles. They ensure that their interests are served abroad ( 'unfriendly' governments being overthrown in US backed military coups) that their particular company gets nice juicy contracts (haliburton under Bush for example) and that environmental regulation, indeed regulation in general, is blocked somewhere along the line.
I intended that to imply that, while corporations certainly exert influence on political decisions, there are many other powerful groups as well who also exert their own influence. Consider lobbying groups such as the ACLU, the NAACP, the NRA, and most of all, the AARP.
On January 28 2010 05:42 L wrote: [quote] That's not really true, because even if you don't have 100% efficiency, you can always have something other than a closed system; if you create wealth, then it can be destroyed by inefficiencies, but the onus would be on creating more wealth. If we take manufacturing to be the prototypical example of a clear value added process, we can see that MAKING STUFF GIVES YOU MONEY. If, however, the only thing you do is cyclically trade around retail goods, you simply run out over time.
The idea behind his statement is that the near complete collapse of manufacturing has stopped the input of wealth into the system, which is now spinning around in service industries being shaved down slowly.
[quote]
The green revolution is the largest example of a sharing of technological advances and know-how. It occured pre globalization and has probably saved billions from starvation.
You need to do more than say that globalization has existed while the standard of living has increased. You need to isolate globalization.
Yup ,100% L. Thank you for communicating that more eloquently than I did. The point of my Gamestop analogy was not to show off the precise mechanics of economics, it was merely to illustrate in a very simple way for people NOT acquainted with economics, that the value-added process has been destroyed in America.
what value-added process? do you know what that means? you're talking about taxes and how taxes somehow make everyone poor and unsustainable. are you serious? your manipulation of numbers is astounding i don't know how you went from paying taxes to
The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.
but either you're a super mega genius or you have no idea what you are talking about.
I'm a super mega genius. The entire point was to illustrate that there was no point in that cycle that any value was ever added.
You're crying because you don't see where any value was added in that process. So, I accomplished my job. Wewt.
I'm not saying taxes make everyone poor and unsustainable. I'm saying capital leaves the retail industry in the form of taxes and salaries to corporate execs. If the Main Street labor market is dependent on growth in the retail industry, then it's a very shaky foundation, seeing as retail has these constant siphons to pull money out of the industry. AKA growth in the retail sector is unsustainable.
Normally, this would be curtailed by the interplay between the manufacture sector and the retail sector playing off each other. The more sales retail has, the more orders for the manufacture sector, back and forth etc. That's how growth emerges in both sectors.
But now the manufacturing sector has been exported to foreign nations. This symbiotic dynamic has been broken. There is nothing but a constant flight of capital away from Main Street. It's really a simple concept, but you're so busy trying to get indignant over my imprecise economics that you choose to bluster and screech instead of see the actual point. It's an analogy. It's not a precise model of exactly what's going on in the entire US economy with every single tax law and channel of capital flow being described. If I wanted to write that, I'd go get a PhD in economics as I'd have pretty much done all the work with none of the benefit.
you're assuming that the retailers lose money because manufacturers are being exported? there is no change in the dynamic here just because manufacturing has moved. more retail still = more manufacturing. people buy things, retail makes profit, manufacturer makes profit. sure, this takes away low skill labor but it creates labor as well because now there are more distribution and management issues to be handled. keeping manufacturing here would hurt retail far more as cost for labor would be so much higher raising price for goods.
But the distribution/management chains require far fewer people, whereas our population is growing with each generation. I see mechanization replacing human labor in the USA, but the people who lost those old manufacturing jobs are just not intelligent enough to find work in a society only interested in high skill labor. At best, the lower classes can become janitors, trash collectors, room service etc. And very few of these jobs are enough to sustain a family.
Traditionally, society relied on agriculture as a way for poorer, less educated people to sustain themselves. This was transferred in large part to manufacturing during the industrial era. But now in the computer age, many of the manufacturing jobs that were lost don't have a parallel to shift into. I'm not trying to be mean, but there are a significant number of people in the population with limited intellectual capacity. They can't really go become supply-chain managers, or financial officers, etc.
Maybe that is progress, but I see it as a source for future volatility as the lower-middle classes will feel increasingly resentful towards income stratification. A big part of USA's stability in the 20th century was the formation of a large middle class. We're now seeing that middle class disappear, and with it, that once stable core of American citizens.
what you are describing is what has happened before, is happening now, and will happen for all time. unskilled laborers becoming irrelevant, who'd have thought?
this, however, is a separate issue and really has nothing to do with globalization as it would happen regardless.
Structural unemployment has nothing to do with globalization? Hm, that's a new one.
And I disagree that this has happened before. We have not had a precedent where a sector as huge as agriculture or manufacturing was rendered obsolete with no sustainable, value-added industry to replace it. A service based economy that relies on consumerism just doesn't work in my opinion. It doesn't benefit Main Street. Modern nations need to come up with a good solution to employing their less-skilled citizens. This is not like 5-8% of the population. It's a majority of the population that is increasingly losing their jobs without a sustainable industry to be employed in.
When you take the military, agriculture, and manufacturing out of the equation as main sources of employment, as we are seeing machines take over these jobs more and more, it becomes a serious issue that modern capitalism needs to address. So far, the answer has been rampant consumerism so that people can be employed in retail or service sectors. My point the whole time has been that this is an unsustainable strategy, built on the backs of 3rd world labor (which will not be 3rd world forever), and leads to no real growth because all we've really built are shopping malls and overflowing landfills full of thrown away merchandise.
Look at what's considered the modern day savior in economics right now. The world is hoping that China's citizens will rise up and create such a ridiculous amount of demand for products that it will pull the rest of the world out of the doldrums. What kind of exit strategy from recession is that? Let's hope China joins in on the rampant consumerism so we find more people willing to blow all their money on unneeded luxury goods and we can keep this ball rolling?
I'm sorry but quality of life is not ipods, flat screens, and blackberries. Not when we're forced to work more hours, at more intellectually strenuous occupations, with higher stress levels, for less effective pay. That's not an increase in quality of life.
it's too bad a majority of jobs in the last two decades or more have been in the service industry. this is not going to change, at least it will not revert back to industrial labor. as production techniques improve there will be less and less need for manual labor and this is the fulcrum of the issue, not globalization. your argument is based on the assumption that we are still an industrialized nation and that moving away from this will cause the financial collapse of the middle class which is simply not true.
the world is hoping china creates demand because it is currently offsetting the balance of supply. if you have a country of however many hundreds of millions cranking out cheap products yet hardly have enough money to meet basic necessities much less purchase luxuries, you have a large imbalance of supply and demand. one of china's largest trading partner is the US and we are in a large trade deficit, ever wonder why? we are buying more from china than they are from us (among other countries).
quality of life is luxuries. that is assuming that the population is intelligent enough to know that luxuries come after necessities. a broke janitor making minimum wage barely making ends meet should not be buying a flatscreen, etc.
You're right that the majority of jobs in the last two decades have been in the service industry. And that's exactly why we're seeing a massive spike in unemployment now. The lie was exposed. As soon as the overconsumption went down, all that supposed "growth" in jobs disappeared. It was driven by American consumption.
That level of consumption has now been shown to be untenable. People were relying on bubbles to fund their lifestyles. Scooping equity out of their homes to buy shit they didn't need. Now everyone's cutting back and suddenly a generation of workers have no jobs. And there's no foreseeable way to create enough jobs to absorb the unemployment. It is a critical issue when a third of the country is underemployed.
We are NOT an industrial country anymore. THe problem is we aren't anything now. I mean, what do we produce? Pharmaceuticals? Britney Spears? Video games? We're a country that creates some brilliant intellectual property, but that doesn't employ a nation. It is a serious issue, one that you will see grow worse over time as each generation enters the labor force and the percentage of them actually finding jobs decreases.
no. you can't just blanket the situation like that and blame it all on "overconsumption" which is not the issue we were dealing with in the first place. booms and busts happen, they've happened before and will happen again. it is neigh impossible to have a completely stable economy in that aspect.
there was no lie exposed, in fact, i'd like for you to describe to me the lie that was there in the first place. our current receding economy is a by product of numerous factors, none of which are "lies". the fact that this problem is worldwide shows that it is not a problem with our overconsumption.
this has nothing to do with globalization or capitalism, perhaps more with the issue of policy-making and regulation. unless you want to destroy the concept of credit everything you've describe could happen to any system of economics.
your argument has trickled from globalization and capitalism is bad, to exporting manufacturing is bad, to overconsumption is bad. you have not addressed any issues that have been brought up contrary to your opinion and instead are trying to validate your views and opinions by saying how bad the economy is right now and how obviously so-and-so caused it. PROTIP: it doesn't work that way.
also lol one third
you're also forgetting that analysts said that when the baby boomers retire there won't be enough workers to fill in positions.
Wow, nice blow-by-blow response ZeroJumps. Must say, I'm happy to see someone able to articulate these conservative views. The one thing I would add is a little bit of a rabbit trail, and I hope it doesn't derail the thread, but here goes anyway.
One of the arguments against free markets that I've found strongest is the tendency of democracies and free markets to rely on people voting or acting in their own best interests, i.e. selfishly. Although the OP is pretty wordy, I think the crux of the argument is this exactly, that free markets are immoral in that they cause people to behave selfishly.
After being forced to think about this in one class or another in just about every term in college (I attended university in Canada), I have come to the conclusion that the reason the American model has been so successful (America being the world's dominant economic power for how long now?) despite being 'evil' or at least immoral, is the unique conflation of religion, nationalism, work ethic, and morality present in America. Christian principles specifically are more or less an 'antidote' to the immorality inherent in free markets. I also think this is why the problems with free markets are seen so much more readily by those outside the US in post-Christian Europe, and by those in academia (which is also post-Christian).
Anyway, just one other dimension of the debate which I haven't seen mentioned yet.
Selfishness is reality. I would actually argue that it is a reason to SUPPORT free markets. Free market works exactly because it recognizes and tries to take advantage of the reality that is human selfishness.
Kind of like how humans evolved to be altruistic because of their selfish gene (from the book, The Selfish Gene -- a good read btw), a free market is in many senses altruistic (gives the greatest good to the greatest number) because it is selfish.
On January 28 2010 12:29 StRyKeR wrote: Selfishness is reality. I would actually argue that it is a reason to SUPPORT free markets. Free market works exactly because it recognizes and tries to take advantage of the reality that is human selfishness.
Kind of like how humans evolved to be altruistic because of their selfish gene (from the book, The Selfish Gene -- a good read btw), a free market is in many senses altruistic (gives the greatest good to the greatest number) because it is selfish.
An actual free market doesn't give the greatest good to the greatest number of people. That's why you have mixed markets, because free markets are so abusive that they implode.
Capitalism and Globalization are excellent policies. I mean it's based on the idea of people doing what's best for themselves and not what's best their communities, and ladies and gentlemen there is no better driving force then that of greed. But greed causes corruption, and corruption kills economy. I'm talking about CEO's pocketing money, monopolies, malicious business practices, stock market exploits, and fucking shit-head carrier politicians who let everything happen while they stuff there fat faces at free corporate lobby lunches. It's a good system as long as you can manage the corruption, and yeah maybe you can't keep your family farm competitive, but hey you threw away your Walkman for an ipod how many years ago?
On January 28 2010 09:25 ZeroJumps wrote: First, Hi! I have followed the TeamLiquid forums for a while now, but have thus far avoided posting. This thread, however, merits special attention.
It's a provocative title I know. But it's exactly what I want to debate.
Not just because the opening post is lacking in specificity and riddled with errors, but also because the majority of responses have been mere echoes of assent. Its a provocative opening, I know. But it’s exactly what I want to debate.
To start things off I'd like to open with the latest address by President Sarkozy of France: Globalization Got Out of Control
It’s difficult to believe that one would ever see an argument in favor of globalization and capitalism coming out from Sarkozy. Over the last few decades, France has seen significant cultural, social, and economic unrest among its population due to increasing number of immigrants, particularly those from Eastern Europe and the Middle East. I suspect if Sarkozy was seen to be advocating for greater globalization, he would soon be out of a job. This isn’t to say that his points should be discounted, but rather just that one should recognize his likely biases.
Now, the way I see it, what's currently taught in economics and finance classes in America is this concept of globalization, free market, capitalism, and less taxes/regulation = increased economic prosperity.
I want to go ahead and say that's crap.
And I’m going to go ahead and say that you’re wrong. (This isn’t meant to spark a flame-war, but rather to announce my intention to debate the rest of your post)
To begin, you will need to be a little more specific in your terminology. What do you mean when you say “free-market”, and less “taxes and regulation”? Are you talking about capital gains taxes, income taxes, or taxes in general? Do you mean less regulation on business? Or less regulation on capital and labor flows? One last point on this paragraph, and that is to say, as written, it is mostly correct. However, it should be noted that the predicted increase in economic prosperity is never immediate, nor does it imply that there will not be losers among certain segments of the population. Rather, increased economic prosperity is viewed in the aggregate, or the sum of the entire population.
First, one of the central tenets of modern capitalism is this concept that the "free" market leads to benefit for everyone. They think that things naturally move to an equilibrium in demand/supply/price if left alone. The rationale for this is that people, with enough info, are perfectly rational beings that make the best choices
.
This is true if one is considering only the most basic or unrealistic economic models. I’m not entirely sure what you mean by “if left alone”, but I’ll take it to mean zero regulation, no taxes, and complete freedom in the movement of capital and labor. Also, I think you will find that every market, no matter how regulated or restricted, reaches some kind of equilibrium. I think what you meant to say is that economists believe the market will reach a perfectly competitive equilibrium, where you have many identical firms producing a given good at where price is equal to marginal cost.
While some models do predict a perfectly competitive equilibrium from these things (and often only because they simply don’t include measures of them), I don’t think you could find a serious economist who believes such an equilibrium would result. As an aside, that kind of world is essentially anarchistic, and it is difficult to imagine any sort of nation-state even existing, let alone trading.
The problem with this theory is it doesn't account for the destructiveness of monopolies
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Which theory? Please be more specific. There are many economic models which do, in fact, account for the “destructiveness” of monopolies. Some kinds of monopolies also argue against your belief that economists always believe less regulation is a good thing. There are many situations where a regulated monopoly is the most desirable option. Any industry with high fixed costs and low marginal costs is well suited to allowing such a monopoly to exist, such as electric companies and telephone companies. (Imagine if there were many electric companies, and each had to lay their own power lines!) You are right that such monopolies could be “destructive” if they weren’t regulated, but my point here is that even “free market” economists see the value in certain kinds of regulation.
In business, anytime a group has either grown or merged into a large enough economic body, they can start to implement destructive strategies like dumping a ton of their products at a very cheap price onto a foreign market and wrecking the local competition. This is validated by capitalism and the free market because this is merely a strategy to increase market share, and if they have the resources to engage in such an act, then they have every right to. Over the span of a few years, this group demolishes the local competition and creates a monopoly. Then they jack up the prices a ton and win back all the profits they gave up with this strategy. Except once they've recouped their investment, they continue to do it perpetually. This is a win-lose scenario. Yet, it's an example of what happens on the "free" market. This doesn't lead to constant competition and cheaper prices/higher quality for everyone. This leads to a stagnant market where one giant is in control and sells at exorbitant prices because they are the controllers of all supply.
I’ll begin by saying that many countries do indeed have anti-dumping laws to protect against just that. But such laws are foolhardy. Your assessment lumps together two distinct kinds of dumping.
The situation you’re describing is one in which a company prices their goods such that price is less than marginal cost, meaning they take a loss on every item sold (a.k.a. several recent game consoles). Such maneuvers can often result in other companies being forced out (note, however, that this is not limited to international competition). However, such behavior is not economically viable in the long run. As you say, prices must eventually go up. The extent to which people are willing to pay premiums above which they originally paid however, is limited by the elasticity of demand for that good. No one is going to pay $12 for a nail when they can buy a screw instead for $.01. Furthermore, once the company raises prices to above price equals marginal cost, it opens the door for competition to once again enter the market.
The second situation is one in which the company prices their goods below the prices of other similar goods in the area, but at a price above marginal cost. This is a perfect example of specialization. If one company or country can make a profit by selling their goods at a lower price than another, then that company or country should specialize in the making of that good. Certainly, there will be some negative elements involved, such as workers of the higher-priced company being laid off, but the net gain to society more than compensates for that loss. Although this gain is most often considered in terms of lower prices, consider that lower prices result in increased profits of other companies, allowing them to expand and create new jobs.
In capitalism, it's theorized that the only way to combat this is for another giant group to emerge. Yet, this sort of competition doesn't help at all. While the two giants are growing, they experience economies of scale and their efficiency increases. Yet, once they reach a certain size, they start to experience the DISeconomies of scale from being too bloated. But they have to continue this arms race, because if they try to scale back, the other one will have the advantage in buying power for that short window of time and can steal more market share, thus perpetuating an advantage until the guy who stepped back first is destroyed.
What? This sounds like something you didn’t think through properly. Did you have a specific example in mind here? What does it mean to have “an advantage in buying power”? What do you mean by “scale back”? I also think you are confused about the nature and importance of market share. For the sake of argument, however, this is how I will take this paragraph: Both companies are too large. Thus, the price of their goods has risen (due to operating inefficiencies perhaps). One company recognizes this, and reins in their production (perhaps closing several production plants or store outlets). The other does not. By not doing so, the inefficient company gains an advantage over the efficient company (perhaps because they have more production plants relative to the other company now), and uses that inefficiency to eliminate the other company. The problem with that is that the first company is, by definition, inefficient. It cannot gain an advantage over the other company. How could it? The other company will produce the same good, but for a lower price. I think perhaps you believe market share to exhibit some kind of snowball effect, whereby once you achieve the largest market share, then you automatically eliminate the competition. Perhaps I have misunderstood you, but such behavior is not predicted in economic theory, nor is it seen in the real world. In the case you described, the inefficient company has no choice but to follow suit.
This creates an effect where giants are constantly forced to grow bigger to compete
This is misattributing cause and effect. Companies don’t grow bigger so that they can compete, companies grow bigger because they are competitive. Walmart didn’t just decide to become a national chain so that they could be competitive. They became a national chain because they were competitive. At the risk of being too repetitive, companies rarely ever grow bigger unless they are efficient.
even though in the long run it leads to a net loss in efficiency. This is what the free market creates.
My previous statement makes this false. The most successful companies are the most efficient. This makes intuitive sense. You don’t see large, successful companies that are inefficient. (Unless you count the US government as successful, but that’s beside the point )
The problems with this are obvious. This is why countries have effected protectionist policies to defend against these sorts of aggressive economic strategies. Then you no longer have a free market. It becomes mixed. Our world is full of mixed economies.
Since your earlier statements were not true, the problems with this are not obvious (sorry if this seems too confrontational, it is the way my mind proceeds when I attempt to make an argument). You are right that countries have created protectionist policies to defend against domestic problems resulting from international trade. But those policies are always misguided. Why do they create them? Because the advantages gained from trade are much more difficult to see than the losses. A reduction in the price of nails from $.02 to $.01 as a result of trade saves millions, if not billions, of dollars per year. But no single company sees that entire picture. But the workers in the U.S. who make nails and got laid off are highly visible. They write to their congressional delegation. They appear in the newspaper and on television. Yet the sum of their wages might not even total a million dollars per year. Even though the net gain is much higher, it is not as noticeable.
The last 30 years of economics in the USA and the world, is a constant attempt to try to bring down these protectionist strategies on the belief that free market was more efficient and beneficial for all. Peep the giant economic collapse we just had. It's pretty obvious to everyone now that this free market liberalization was a horrible idea. It destroyed local industries, it gutted nations, it destroyed whole swathes of industry in nations, and all it really did was lower the retail prices of goods.
As another previous post said, this seems like nothing more than a populist outcry. Blaming the economic collapse on efforts to bring down protectionist barriers does not make sense. I fail to see how trade tariffs, immigration restrictions, and limits on international capital flows have anything to do with banking regulation. Capital flows and capital gains taxation are in the realm of banking, but are not themselves causal agents in the collapse.
That's the problem with the concept of free market. It's too focused on price of goods as a barometer for efficiency. It fails to address the issues of labor and wages. Now if you try to approach the labor market using capitalist and free market principles, you end up with sweatshops in China and India.
I think the price of goods is an excellent barometer for efficiency. While I believe using it as a measure does neglect many important other things, such as happiness or environmental concerns, the one aspect it does excel at is to provide a measure for labor and wages. Wages mean nothing with a price to compare them to. $1 a day will buy one nothing now, but 100 years ago? Similarly, a wage is nothing more than the price of labor. Perhaps you meant that the focus of companies on the price of goods prevents them from paying adequate attention to the needs of their workers. (I think this is, after rereading your paragraph, how you meant it). Sweatshops are an oft-cited example of “evil corporations” that exploit people. I typically associate this kind of statement with people who have never been outside of first-world countries, or experienced true poverty. Not poverty as defined by the US ($22,000 for a family of four), but poverty of the kind where people earn less than a $1 a day. In such situations, a job at a sweatshop is almost a miracle. The alternative to such jobs in poor countries is frequently to not know if or when you will eat again. People living in developed countries often forget how terrible situations can be elsewhere. A common counter-argument to this is “Well, why don’t companies just pay them as much as they pay their American workers?” There are many answers to this. The best is probably that the labor pool is just too large. The United States makes up a but a tiny fraction of the world’s population. For every child in Egypt making shoes for $2 a day, there are a hundred more who would be willing and happy to do it for $1 a day. A second is that, if they did, there would be no incentive to hire workers abroad. All it would do is increase the costs of their goods, as they would need to be shipped further.
Does anyone honestly think it is a good thing to compete with sweatshop workers in terms of pay/productivity?
There is a reason manufacturing industries are declining in the United States. Does anyone honestly think this is a bad thing? American wages have been increasingly consistently over the last...250 years. Unemployment has stayed all but constant, and far lower than almost any other country on the planet. This suggests that the positive effects from structural changes in the economy, such as the shift from a manufacturing based economy to service based economy, far outweigh the negative.
There is a common story told about such shifts: Everyone used to worry that robots would take over all of the manufacturing jobs, and then there would be massive unemployment. Except, when the robots took over, the unemployment spike didn’t happen. Why? Because people were needed to build, operate, and maintain the robots.
Countries specialize in the things they are best at. The United States used to be among the best manufacturers in the world. So there were many manufacturing jobs. Now, as our standard of living, our productivity, and educational attainment have all increased, we are no longer the best at manufacturing. We still might be able to produce more per person than another country if we focused on manufacturing, due to our infrastructure and technology, but what would be the point? Instead, we move onward and upward into a service-based economy.
There is only one real way to improve labor's market value, which is training that improves their productivity. Yet, the sad truth of the matter is that even with a great education, a large proportion of the population is not that clever. They can't really be trained that far past the level of a sweatshop worker. This is what's traditionally known as "retail sector" or "blue collar."
The first sentence is more or less correct, though it neglects the role of technology. I agree that the intelligence of the average person of the United States is “not that clever”. But, again, go outside of the first-world. The literacy rate in the US is close to 100%, and almost every student attends some high school. While poor countries have made great strides in recent years (thanks to globalization. . .), almost 100 still have literacy rates below 80%.
This makes up a pretty large percentage of the world population. Yet, the blue collar workers in America don't want to work in sweat shop conditions. Capitalism and the free market tells us that the smart thing to do is just tell those blue collar workers to fuck off and move the factories to China.
And this is a problem because? I understand that, given the current unemployment rate, and given how the recession has disproportionately effected men in manufacturing, that such a response seems callous. That’s because it is, in the short term.
This is why you see an increasing wealth disparity between the rich and poor in America. The poor have lost their jobs to the increasingly "free" labor market,
Is it? Does $30,000 a year for a factory worker job narrow the wealth disparity between the rich and the poor? No, it does not.
whereas the rich and intelligent Americans have increased their value because they have some of the world's best education, coupled with some of the world's best tools of production
AKA, the American factory worker must compete with the Chinese sweat shop worker.
I just want to point out here that the standard of living and the wage level for all income groups has being increasing in America since its founding. It isn’t that the poor are getting poorer and the rich richer, it is that the rich are getting richer faster than the poor are getting richer.
The American Harvard graduate competes with the Chinese Beijing University graduate. Except the Harvard graduate gets to enter an organization like Goldman Sachs, with some of the world's best financial algorithms and the best financing and the best connections.
I think you meant: The American Harvard graduate competes with the Chinese Harvard graduate. And that is one the best thing about having less protectionism. With more freedom of movement for labor and capital, the best and brightest in other countries are allowed to make use of the top schools in the world.
Therefore, while the free market has allowed the Harvard graduate to reach greater and greater heights by reaching the pinnacle of the financial world and reaping the benefits of competing vs the world due to massive, built-in advantages, the American factory worker has been laid off and can't find another job because he/she is now competing versus the 5 billion people of the developing world.
Right. But again, this is a short term loss for a much greater long term gain. Think about the industrial revolution. It was essentially the same, except that instead of services replacing manufacturing, manufacturing replaced agriculture. Does anyone (other than dirty hippies) think America is worse off for having undergone that transformation?
Do you guys see now why the free market is not helping the vast majority of America?
To go back to the linkage between prices and wages: you don’t see how it is helping because you simply don’t notice it. When you go grocery shopping, do you stop to think, “My grocery bill this week was $100 less this week because of free trade”? Free trade results in a purchasing power increase of tens-of-thousands of dollars every year for each and every person in the United States. That is not an exaggeration. Consider how many goods you buy every year, and then realize that anything not made in the United States is cheaper than it would be otherwise. Even goods made in the United States, such as strawberries from California, are cheaper because they have to compete with Mexico. And, if that’s not enough, consider that you even have the option to buy strawberries in January. All because of free trade.
And if you look at the labor markets, the greatest shift has been away from manufacturing and towards retail. Yet it's a nonsensical shift. How does it make any sense when the retail industry is driven by consumption, and the consumption is paid for by wages from the retail industry?
Are you asking how can goods continue to be produced in a country if no one is actually making goods?
This is like saying, I get a job at Gamestop. Then I buy a ton of games from Gamestop. Eventually, Gamestop will expand because I'm buying so many games with my wages from them, that Gamestop's sales will be enough to expand.
It makes no sense. Money is constantly being pulled OUT of the economy this way. Every time you put $50 through the system, you end up with less. First, I get the job at Gamestop. They pay me $50. Yet, I pay income tax on that $50. It then becomes $42.
This $42 is then spent to buy a game. Yet I need to supplement it with another $8 from somewhere. So, already I'm at -$8. Okay, $50 + tax = $53. Now I'm at -$11.
Then Gamestop gets their $50 and has to pay corporate tax on it. So they're down to what? $40? A net of $-21 for a single transaction between retail to employee and back to retail.
So, in every transaction of $50 of wages going out of the system, we end up with only $29 of it going back in. It's rather obvious that the US labor/wage market can not be sustained by this type of relationship.
I don’t really know what to make of this. It almost seems like you see tax money as being removed from the system.
The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.
The reason is because the tax dollars are being siphoned off. That $21 that was taken out is given to the government.
Right. You do see taxed dollars as just vanishing. Let me redo your gamestop example (keeping it simple):
You work at gamestop. You get paid $100. Income tax takes 20%. You now have $80. You buy a game for $50, with $5 of sales tax. Now, gamestop has -$50 (the game – your income). You have $25. The government has $25. The government uses that $25 to buy concrete an pay a worker to repair the pothole in your street. Now that worker has $25. Now he buys a game from gamestop. Which fuels your next paycheck.
Economies are vast. Money changes hands very frequently. Money doesn’t just disappear from the system.
Yet, the government we have today is increasingly controlled by corporations. According to current moral and economic philosophy, like that espoused by Jibba and others on TL, it's perfectly okay and constitutional for a corporation to get involved with government. On top of that, morals have no place in economic decisions. Therefore, it is completely okay for a corporation to try to pay to get laws passed that benefit the corporation.
This reads like a conspiracy theory website. I can’t argue that corporations don’t heavily influence politics. But, two points to consider: first, the United States has one of the highest capital gains tax rates in the world. This is extremely detrimental to business. Second, income tax is progressive. Larger corporations pay more in taxes. One would think that, if corporations really had significant influence, these items in particular would be among the first to change.
What this means is that those $21 instead of going back into an industry that benefits the lower classes could be funneled into an industry that doesn't support hardly any of the middle-lower classes. Such as the banking industry! So, not only is the middle class losing jobs, competing with a vast number of foreign competitors, but they lose nearly half of every dollar to that mfing Harvard graduate. Because he/she is busy wheeling and dealing, screwed a bunch of people over with greedy "capitalist" ploys, and then needed a bailout.
I realize that writing quality goes down the longer one writes (witness my own comments), but there really isn’t anything of substance in here. I guess I’ll just point out recent income tax statistics: (google IRS summary of Federal Individual Income Tax Data 2007 or 2008 for source) In 2007, The top 1% of income earners paid 40% of total income tax. The top 50% of income earners paid 97% of total income tax. In other words, of that $21 dollars in taxes, $20.50 of it came from the wealthy. I find it hard to make an argument that taxation is hurting the poor.
On top of that, to the people who claim that of course the solution to all this is just get rid of taxes, I ask the question, ok, then where is the growth?
Sure, without taxes the $50 between me and Gamestop is cycled back and forth. Yet, that $50 will never grow. It remains $50. Therefore, even in the most ideal of circumstances, the money is not lost, it only remains the SAME. ZERO growth.
In fact, accounting for inflation, you'd still see a loss of $1-2 each year. The industry continues to lose in a perfectly ideal situation. This is why the concept of consumer-based society leading to growth is total bullshit. You cannot grow an economy by spending money. That doesn't work.
We don’t have a consumer based economy. We are moving toward a service based economy.
The only way to grow the economic pie is technological innovation which decreases the cost of production. This way, I spend $50, Gamestop gets their $50 back. Yet, they have factories/studios that can produce the game for only $5. Therefore, they pay me $50, I buy from them for $50, they get back $45. They can then afford to make 9 more games. With 9 more games, they can make enough money back to hire 8 more workers. This way the loop continues.
Except somewhere in the loop, the business decides that instead, they're just going to pay all those profits to the CEO. We don't need to increase that many jobs. We'll just give it to the top guys. Therefore, once again the middle and lower classes are powerless to stop the flight of money from the consumer-supplier loop.
Technological innovation is certainly a good thing. It reduces prices. But so does shifting labor to another country. Perhaps another example: Say they fire you because they don’t need you making the game anymore, because they hired a worker in another country. Since they can now make games cheaper, they make more profit, enabling them to expand. You get rehired as architect to design their new buildings. Now instead of being in manufacturing, you’re an architect. (Think about this on a national level, not on an individual level)
In pretty much every way, using capitalist and free market principles leads to a loss for the middle and lower classes. This is why Sarkozy says capitalism needs to be refounded to be more moral. That finance, free trade, and competition are a MEANS not an end. And it needs to be redefined and reinvented.
Remember what I said about Sarkozy’s likely biases and political pressures?
It's because morons run around trying to claim that the free market leads to increased efficiency and prosperity for all as long as everyone just makes decisions in a totally selfish manner. It doesn't. It doesn't work. The past 30 years have shown it doesn't work. It's led to disaster. The globalization and free market proponents were wrong. They did nothing but justify selfishness as a good thing.
There isn’t really anything to respond to here. I would be happy to argue with you some more, if you would like. You said you were familiar with economic concepts in a previous post. Maybe we can break out our favorite international macro or international trade models.
I didn't read it all, mostly because I'm disappointed in how you started off.
You start off criticizing the fact that American economics don't account for monopolies, but they obviously do. At the very basic levels in economics you even create graphs to account for the overall welfare society benefits from a market without a monopoly and a market with a monopoly, and the market without the monopoly is much better. Oligopolies fall in the middle.
The economic setback we are in - although yes caused by a market without regulation - were not caused at all do to competition. The financial crises was caused by the housing bubble, derivatives, and shitty insurance ratings on said derivatives.
There is no way to stop America from turning away from having a large manufacturing sector. If you have a viable solution, enlighten me. The only one I can think of would be to heighten tariffs, which only results in other countries responding the same.
Your gamestop analysis is GOD AWFUL. First of all - capitalism (the way you're portraying it especially) has one of the chief aims at minimizing taxation. Yet you're saying taxation is a result of taxation? Gimme a system that has LESS taxation than a capitalist society. Second, why are you out $8? You are fully aware that you are going to receive $42, not $53, so don't go and buy something for $53?! What's your point? That the government is taxing retail items/wages? Ok, given that point, now you're complaining that the full amount of money goes back to the industries/corporations? Either way - you're analysis hardly makes any sense and sounds like little more than jibber/jabber to me.
It's the companies own decision whether or not it wants to pay the CEO $X, and if you don't want to work at the company for the $42, I suggest you look elsewhere.
Personally I'm against hte minimum wage and feel that there is a no reason a company should be obligated to pay a person $8 an hour when they have people perfectly willing to work for $6, or less. It's nothing less than forced charity in my eyes, and factor that leads to a much higher unemployment rate and people without jobs (and companies generating less profits).
First, one of the central tenets of modern capitalism is this concept that the "free" market leads to benefit for everyone. They think that things naturally move to an equilibrium in demand/supply/price if left alone. The rationale for this is that people, with enough info, are perfectly rational beings that make the best choices.
no, econ shows scarce factor gets screwed...but overall everyone is happier.
The problem with this theory is it doesn't account for the destructiveness of monopolies. In business, anytime a group has either grown or merged into a large enough economic body, they can start to implement destructive strategies like dumping a ton of their products at a very cheap price onto a foreign market and wrecking the local competition. This is validated by capitalism and the free market because this is merely a strategy to increase market share, and if they have the resources to engage in such an act, then they have every right to.
Over the span of a few years, this group demolishes the local competition and creates a monopoly. Then they jack up the prices a ton and win back all the profits they gave up with this strategy. Except once they've recouped their investment, they continue to do it perpetually. This is a win-lose scenario. Yet, it's an example of what happens on the "free" market. This doesn't lead to constant competition and cheaper prices/higher quality for everyone. This leads to a stagnant market where one giant is in control and sells at exorbitant prices because they are the controllers of all supply.
yes, monopolies are bad. econ shows that they are bad since they don't produce at the optimal price/quantity. so, in this sense, capitalism needs some fixing from the government. generally, monopolies occur just because barriers of entry and some other stuff. nothing wrong with that though.
The problems with this are obvious. This is why countries have effected protectionist policies to defend against these sorts of aggressive economic strategies. Then you no longer have a free market. It becomes mixed. Our world is full of mixed economies.
The last 30 years of economics in the USA and the world, is a constant attempt to try to bring down these protectionist strategies on the belief that free market was more efficient and beneficial for all. Peep the giant economic collapse we just had. It's pretty obvious to everyone now that this free market liberalization was a horrible idea. It destroyed local industries, it gutted nations, it destroyed whole swathes of industry in nations, and all it really did was lower the retail prices of goods.
no, they want to prevent their scarce factor (labor) from getting screwed. because laborers are voters. those people are producing things inefficiently. propping up inefficient industries is a bad idea. => destroying local industries is a good, but unpopular thing.
What use are lower prices when you don't have a job?
they are good for the people that have jobs.
That's the problem with the concept of free market. It's too focused on price of goods as a barometer for efficiency. It fails to address the issues of labor and wages. Now if you try to approach the labor market using capitalist and free market principles, you end up with sweatshops in China and India.
no, productive capacity of the country is the most important thing not jobs and wages.
Does anyone honestly think it is a good thing to compete with sweatshop workers in terms of pay/productivity?
what?
There is only one real way to improve labor's market value, which is training that improves their productivity. Yet, the sad truth of the matter is that even with a great education, a large proportion of the population is not that clever. They can't really be trained that far past the level of a sweatshop worker. This is what's traditionally known as "retail sector" or "blue collar."
education makes them clever.
This makes up a pretty large percentage of the world population. Yet, the blue collar workers in America don't want to work in sweat shop conditions. Capitalism and the free market tells us that the smart thing to do is just tell those blue collar workers to fuck off and move the factories to China.
if you want to get paid 2x more than someone else, make sure you're 2x as productive.
This is why you see an increasing wealth disparity between the rich and poor in America. The poor have lost their jobs to the increasingly "free" labor market, whereas the rich and intelligent Americans have increased their value because they have some of the world's best education, coupled with some of the world's best tools of production.
AKA, the American factory worker must compete with the Chinese sweat shop worker.
yes, he got screwed.
The American Harvard graduate competes with the Chinese Beijing University graduate. Except the Harvard graduate gets to enter an organization like Goldman Sachs, with some of the world's best financial algorithms and the best financing and the best connections.
Therefore, while the free market has allowed the Harvard graduate to reach greater and greater heights by reaching the pinnacle of the financial world and reaping the benefits of competing vs the world due to massive, built-in advantages, the American factory worker has been laid off and can't find another job because he/she is now competing versus the 5 billion people of the developing world.
yup, go to school.
Do you guys see now why the free market is not helping the vast majority of America?
majority is helped. minority gets screwed.
And if you look at the labor markets, the greatest shift has been away from manufacturing and towards retail. Yet it's a nonsensical shift. How does it make any sense when the retail industry is driven by consumption, and the consumption is paid for by wages from the retail industry?
This is like saying, I get a job at Gamestop. Then I buy a ton of games from Gamestop. Eventually, Gamestop will expand because I'm buying so many games with my wages from them, that Gamestop's sales will be enough to expand.
It makes no sense. Money is constantly being pulled OUT of the economy this way. Every time you put $50 through the system, you end up with less. First, I get the job at Gamestop. They pay me $50. Yet, I pay income tax on that $50. It then becomes $42.
This $42 is then spent to buy a game. Yet I need to supplement it with another $8 from somewhere. So, already I'm at -$8. Okay, $50 + tax = $53. Now I'm at -$11.
Then Gamestop gets their $50 and has to pay corporate tax on it. So they're down to what? $40? A net of $-21 for a single transaction between retail to employee and back to retail.
So, in every transaction of $50 of wages going out of the system, we end up with only $29 of it going back in. It's rather obvious that the US labor/wage market can not be sustained by this type of relationship.
there are other industries.
The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.
value judgment
The reason is because the tax dollars are being siphoned off. That $21 that was taken out is given to the government. Yet, the government we have today is increasingly controlled by corporations. According to current moral and economic philosophy, like that espoused by Jibba and others on TL, it's perfectly okay and constitutional for a corporation to get involved with government. On top of that, morals have no place in economic decisions. Therefore, it is completely okay for a corporation to try to pay to get laws passed that benefit the corporation.
irrelevant
What this means is that those $21 instead of going back into an industry that benefits the lower classes could be funneled into an industry that doesn't support hardly any of the middle-lower classes. Such as the banking industry! So, not only is the middle class losing jobs, competing with a vast number of foreign competitors, but they lose nearly half of every dollar to that mfing Harvard graduate. Because he/she is busy wheeling and dealing, screwed a bunch of people over with greedy "capitalist" ploys, and then needed a bailout.
This is how Main Street gets shafted.
irrelevant
On top of that, to the people who claim that of course the solution to all this is just get rid of taxes, I ask the question, ok, then where is the growth?
Sure, without taxes the $50 between me and Gamestop is cycled back and forth. Yet, that $50 will never grow. It remains $50. Therefore, even in the most ideal of circumstances, the money is not lost, it only remains the SAME. ZERO growth.
growth measured in good and services produced. not money supply.
cliffs: 1. basic rule: scarce factor gets screwed. but overall benefit is higher. 2. above is a value judgement that economists dont care about. ie: y people lose their jobs vs x more goods can be produced. economists say that producing more goods is always better, but that's a value judgment and politicians/you can disagree.
On January 28 2010 08:41 Creationism wrote: I wish Sarkozy would jus stop... like... living... Everytime I see him it makes a little more bitter inside.
Part of key concept of globalization is not simply the "free trade" aspect of it that everyone thinks of when they think capitalism, but also the factor movement. It's not the idea that the Harvard student will compete directly with the Beijing University student, but rather they will pick up their comparable advantageous position and trade in this manner. The trade balance is an issue, but much of the ACTUAL problems with globalization is with factor movement (this concern many issues like developing countries, outsourcing, and wage balances)
When developing countries catch up in terms of technological advancement, certain parts of the labor process are directed there because of the comparative advantage and thus better profits. The natural order is that the developing country will catch up eventually and therefore gain more wealth by taking up more skilled ends of the labor spectrum. That is how a country DEVELOPS.
Take South Korea after the Korean War. Massive exports and specialization, with full government support of not only monopolies, but also streamline firms so that they can gain economies of scale easier and develop the infrastrure/technology they need. That is why South Korea got broadband when everyone was on Fisher Price modems.
In the US, what has happened is not a complete breakdown of the system, but rather the savings rate has been so low. The deficit is not simply from the government spending money like guys use water at a wet-shirt contest in the playboy mansion, but also the amount of borrowing and spending that the people has done to bloat the money supply. The money supply is what all these businesses grow on. When it becomes bloated, you have a plethora of businesses and could run fine during the bloated years, but once there is a contraction or a liquidity shock, they have no choice other than merge or consolidate.
I agree that the system needs to be regulated, but not in terms of trade and free market, but rather on the passage of information. The biggest challenge to capitalism, if you have taken ANY economics courses at all, is the lack of truthful information. (about the future, about the client, about the borrower, about the company)
I mean not to totally antagonize the OP here, but the explanation in the post lacks some serious ground work.
My problem with asymmetrical information is that a lot of people even with the info will not make a smart decision. You ever tried to walk into a Walmart and start telling people why the products in their cart are bad for them, are not worth the money, etc? How do you think that would turn out?
I've insisted this repeatedly. The majority of humanity is not that clever. Giving them perfect info won't mean much when their intellect can't even compute the information. Asymmetrical info as a problem is one of those theories bandied about by academics, yet has very little application in the real world. The academics forget that the average person can be rather stupid.
What is a serious problem for the middle-lower classes is not their access to information. Rather, it's the simple fact that they need jobs they are capable of working and need wages that can support a decent quality of life.
And they need regulation by the government to guide them into doing things that are beneficial for themselves. Because, sorry, people are NOT perfectly rational beings. And while they are selfish, they do not always do what is in their best interests. Even if they have the information needed to make a correct decision in front of them.
There are plenty of people who know getting a college degree is pretty important. They've got the info in their faces 24/7. They still drop out. I think most people know heroin and cocaine are bad drugs. People still shoot and snort.
Leaving the druggies out of it (not general population), I agree that the general population is stupid (read my sig, i think we see eye to eye here). But I think we disagree to what is actually real economic information. It's not something like telling people in WalMart why a OreO would kill them (which actually.... class action lawsuit i believe?), but rather that they will live 10 years less if they buy this crap. Or the full economic impact of going to college. If you told an average person that he will make (whats the average salary in the US, dont wanna google it) after 4 years of college instead of his shitty $10/hr job, you really dont think hed do it? (minus the tuition n what not of course)
The rational being we're talking about here is a person who value what gives him more pleasure, as simple as getting laid once a day or twice a day. He spends more energy, but he gets a lot of pleasure out of it. Eventually you will meet a guy whos so lazy that he would forgo the pleasure to save that energy, but even he is rational utility wise. From a God's Eye view, yes, people will not do whats best for them even given ENOUGH information to pick the best choice, simply because they cannot process the information. But that rationality is different from the "rational consumer" we speak of in economics. The "real world" rationality is the ability to make logical steps to arrive at a conclusion, some people can't do that. But I mean if he REALLY had all the information, he would make the rational choice.
The job situation now I believe is a result of the factor movement to basically all overseas over these last couple years. This not completely the fault of capitalism, but the lack of regulation on the factors section of the market, which it really seems no one cares about. Regulations such as the transfer of labor to overseas while still maintaining a ratio of workers here in the US might have come up a few years ago, not quite sure on that now... saw it a while ago. But taxing corporations that have effectly moved sectors overseas as a foreign unit would fix the problem instantly. But I guess you're right about how you'd have to be Moses to pass that bill.
I not only think that a person would still not go to college, but I've seen people who are given these very clear statistics about college degree versus non-college degree, and they STILL drop out of college to go become waiters and think their life is fine because they live in an apartment with two friends and get to go on vacation to Aruba or Cancun once a year or so and think they are living it up.
I agree with your point about the jobs situation though. That's a good point. And I agree that it is lack of regulation that is destroying the labor market. I'm not opposed to capitalism itself, rather I'm opposed to the current iteration of it that has been espoused for the last 30 years, namely a capitalism involving as much deregulation as possible.
And yeah, I'm definitely in agreement with you. Actual government action or regulation at this point to regulate the labor market has no chance of passing. Especially with the latest supreme court decision about corporate involvement in gov't. It's the mentality that deregulation is good that is just killing it over here.
Thanks for the lengthy response and your time and effort are much appreciated
1. By taxes I mean things like tax write-offs by corporations through giving to charities/NPOs that end up looping right back to the corporations, the evasion of corporate taxes by giving out huge bonuses to their executives so they can post them as operating expenses, the constant tax cuts on capital gains, and the increasingly labrynthine ways that the top tax bracket finds to evade paying their actual taxes. There are of course a great deal more, but in essence I think the problem stems from corporations and the highest income brackets consistently avoiding taxes through tax lawyers and armies of accountants, while the middle and lower class can't afford these kinds of resources to avoid paying their taxes.
On regulation, I think the most important aspect is the lack of regulation on capital AND labor flows.
2. You're right that serious economists do not posit this theory. The problem is the political rhetoric in America for the last 30 years HAS been positing this theory. If you look at the political activity, it's been repeal after repeal of regulations, while using this theory of perfect equilibrium and efficiency as their rationale.
3. I should have been more clear. I am talking about the political rhetoric in America and the movement toward globalization and deregulation that has been implemented in the political arena of America. OFC economists have accounted for everything under the sun. There are tons of economists out there postulating pretty much every possible permutation I could think of. I don't mean to say the entire field of economics and capitalism is wrong or stupid. What I mean is the political will of America has been trending towards deregulation, free markets, and the flow of capital and labor out of America (labor more than capital).
4. On dumping, what I'm talking about is the first situation, but also a third situation that wasn't mentioned. The third situation is that a government subsidized industry, like agriculture, is able to grow products at a loss, remain profitable due to subsidies, AND dump their excess product on a foreign market, thereby glutting it and ruining the livelihood of local producers. Take for instance what American dumping of goods has done to Haiti's native farmers.
Also, with the first situation, there is a window of time between monopoly and reentry in the market by a competitor. It's a rare situation in which the competitor reenters and immediately takes an aggressive percentage of market share. There is some significant lag time involved and that's why a lot of times a monopolizing entity can play this juggling game of hiking up prices and then dropping them again to squeeze out any legitimate threat, while skimming hefty profits in the back and forth adjustments. Also, over time, many competitors would see this as an industry with significant barriers to entry and high risk knowing that this monopolizing entity will just drop prices when they try to enter the market. It deters competition from ever entering.
5. On the giants issue, I was thinking more in terms of banking. Whereby the bank with more deposits has a significant advantage over a smaller bank, solely because they have more capital and thereby a great advantage in competing. Sort of like holding the most chips at a poker table. It doesn't guarantee a victory but it is definitely an advantage.
You are right in that this is probably a bad example to use for every industry as it does not apply to all of them and in many cases, the more efficient one would force the other one to scale back.
6. I blame the economic collapse more on a combination of factors including deregulation, but I should have been more specific here. And in retrospect, you are right, this was a poorly constructed OP. What I should have said was that deregulation as a political rhetoric and disposition was one of the leading factors of this economic crisis. This is why I think so:
The monetary policy engineered by Greenspan was extremely loose. The political rhetoric of the time was that deregulation of banking was a good thing. This led to a very low cost of borrowing, AKA money is cheap. This environment of cheap money combined with the repeal of laws banning ARMs and loans of that nature led to the bubble in the housing market and ridiculous overexposure in the banking industry.
So yes, in the end, I blame banking regulation, but inherent in that argument is the belief that less regulation is a good thing.
7. Again, I should have been more clear on this point. What I mean is that this a net loss in jobs for the American labor market. And yes, I'd say this is a protectionist sentiment. The corporations say that this is a good thing because the price of goods is cheaper. Yet, if Americans lose jobs and get cheaper goods, what do we end up with? A guy who makes $0 a day is not going to care if sneakers are $20 instead of $45.
My worry when it comes to manufacturing is that, yes there are people needed to maintain the robots, machines, etc but over time I think that number has decreased. Also, these jobs require more and more skilled labor. I'm wondering if these jobs will someday reach a threshold in which only the top 30% of the population are able to even perform them. What would the other 70% of America do then? But maybe this is an irrational fear. Technology is supposed to make things easier.
8. Good point. I would agree that the income gap is materializing because of the accelerated growth among the rich, rather than a drastic decrease in the growth of the poor.
9. I agree that this is exactly the same parallel. In the past agriculture was replaced by manufacture. And now manufacture has been replaced by the service sector. But I wonder if the service sector is truly an adequate replacement for manufacture. Perhaps I am too ignorant of what the service sector entails or how it perpetuates its own growth, but as of now, I have sincere worries about the sustainability of America becoming a predominantely service-sector based economy. I would love to hear your thoughts on this.
10. About money disappearing. When the US uses that money to launch a missile at Afghanistan, I see that money as disappeared. When the US gives that money to some contractor who installs a toilet for $1,000 I see that as disappeared. When the US takes that tax money and shoves it into Fannie Mae to buy up toxic loans, I see that money as disappeared. While spending on infrastructure would be fantastic, I don't see a lot of the tax money being spent that way. Instead, I see corporate interests directing government spending into channels that don't return to the consumer.
11. Your numbers are correct. But the wealthy used to pay even MORE than this. And I think they should pay more.
Anyhow, hope the numbering I did wasn't too confusing. I'm not good with quotes so I didn't want to go in and try to respond to each quoted block of text. Thanks again for responding and I will admit that you proved me wrong or showed that I needed to more greatly clarify on a number of points.
Still, I hold serious doubts about the virtues of shifting to a service based economy and whether that is truly beneficial for the people.
Also, I hold serious doubts about the fiscal policy of the US government.
I also hold serious doubts about the way taxation of corporations are handled.
But most of all I have serious doubts about capital and labor flows. While it is easy to say that everyone will move into the service sector and be happy, I've yet to see the service sector actually provide enough jobs to replace all the ones lost in agriculture and manufacture.
While it is easy to say that everyone will move into the service sector and be happy, I've yet to see the service sector actually provide enough jobs to replace all the ones lost in agriculture and manufacture.
hardly anyone works in agriculture or manufacturing anymore (this is geographically dependent, of course) in most major cities you go to 99% of the population probably works in the service industry.
farming, forestry, and fishing 0.6%, manufacturing, extraction, transportation, and crafts 22.6%, managerial, professional, and technical 35.5%, sales and office 24.8%, other services 16.5%
I've found that finance relates to cell processes a lot, active transport requires excess energy (the initial input of effort) from the cell (the consumer), to produce a good (energy) for the buyer (cell's ribosome)
Diffusion, however, requires no energy (free trade w/ no capped restrictions), and tends to have lax requirements (capitalistic view of trade-markets) regarding concentration of mass from higher ---> lower (tax increase).
Osmosis is the same, but with the French being involved. Touche, le francais
On January 28 2010 07:58 InsideTheBox wrote: I have so many problems with the OP that I want to cry. My advice is simple; if you "100% agree" with the OP then take some economics courses, go read Globalization and Its Discontents by Stiglitz (if you're interested in globalization, deregulation, historical contexts, etc), and let this thread die.
And to preempt those people that want a "spirited debate" on this topic, I assure you that there is little substance in these posts, and those in disagreement with the OP somehow have mustered the energy to teach you economics 101 (instead of letting you go on with your lives in ignorance).
Um, sorry to inform you, but Stiglitz is in agreement with my position. He's probably one of the biggest proponents of government intervention in capitalism. Sorry, but you kind of came out here, name dropped, then made yourself look bad by not even understanding what it is Stiglitz advocates.
Just because Stiglitz takes it from the angle of asymmetrical information and inefficiencies in the "invisible hand," while I take it from the angle of damage to domestic economies caused by said globalization, does not make me wrong. I'm choosing to focus on the effects, while he is focusing on the causes. Way to not understand anything, yet act like a pompous ass. Still, it was a pretty brilliant example of self-ownage.
Question, where in my post did I say that I am opposed to government intervention in the global economy? Is it that I have to 100% agree or 0% agree; are those my only two options? Simply because we happen to have that singular idea in common does not mean I can't point out how asinine your premises and examples are.
With that being said, I recommended the book because it was relevant to the topic and actually contains good information and application of ACTUAL ECONOMIC THEORY. Your supposed "angle of domestic economies" is ridiculously flawed and this has been partially covered by a few posters in this thread.
didnt the US just reintroduce tarriffs on chinese steel pipes? a more effective argument would be : the capitalist system works on the principle of never ending growth in population , GDP and resource usage yet there is only so many resources on earth. therefore the current model is doomed to failure.
i study accounting and have dabbled in economics, id have to say that some of these points although convincingly phrased aren't entirely accurate. 1st off there are ALWAYS monitoring bodies so the whole argument about the US labour market being in DIRECT competition with say chinas sweat shops is very much flawed. 2nd If i understood your maths right, you were saying that you pay income tax, buying a game includes tax and the company you work for has to pay corporate tax when you buy something, and all these lead to a net loss in terms of money staying circulated in the system. Tax is one of the sure ways of keeping money IN the system and according to economics the goverment should be charged with ensuring the positive multiplier effect.
very nicely phrased and well written article but prehaps without TOO much economic truth or truths put out of proportion
On January 28 2010 20:01 bluegoo wrote: i love how storkhwaiting says he wants to debate then he stops responding to caller once he can't come up with anything (~page 4)
also i have a feeling you took 1 or 2 undergraduate economics classes and feel like you're the shit.
Caller was the one who bowed out on the previous page, while stork continued to respond. Not trying to say either one of them is in the right there, but you're most certainly talking bollocks.
1. By taxes I mean things like tax write-offs by corporations through giving to charities/NPOs that end up looping right back to the corporations, the evasion of corporate taxes by giving out huge bonuses to their executives so they can post them as operating expenses, the constant tax cuts on capital gains, and the increasingly labrynthine ways that the top tax bracket finds to evade paying their actual taxes. There are of course a great deal more, but in essence I think the problem stems from corporations and the highest income brackets consistently avoiding taxes through tax lawyers and armies of accountants, while the middle and lower class can't afford these kinds of resources to avoid paying their taxes.
While statements like these abound in popular media, I really don’t have any idea regarding the extent to which such activities occur. I suspect not even the IRS has that information, as evaded taxes are, by definition, evaded. As noted in my first response though, the wealthy, no matter how much evasion is occurring, bear more than a proportionate share of the income tax burden.
Your worry about decreases in taxation on capital gains is misplaced. One of the few (if not the only) factor in macroeconomic models that is ALWAYS correlated with growth is saving. Capital gains taxes are a tax on savings, and thus inhibit growth. Perhaps the easiest way to see this effect is to consider the effect of an increase in the capital gains tax rate for government bonds. If the tax rate on bonds is higher, the effective real rate of return is lower. As a result, fewer people will purchase bonds. And, because fewer people buy bonds, roads go unbuilt and schools go unfunded. I have yet to meet a single macroeconomist (I haven’t met a lot, but I have met several) who argues for increasing the capital gains rate.
Another thing to consider about the capital gains tax rate is that both the long-term and short-term US rates have traditionally been much higher than the rest of the world (search international comparison tax rates). While the long-term rate is currently lower than usual(as a result of the Bush tax cuts, which, despite a lot of negative press, weren’t a terrible idea), it is scheduled to return to the same levels as the income tax rate in 2011 (the short-term rate has been at that level for a while now). It should be noted that those tax brackets are progressive (higher percentage for wealthier people).
The classic counter-argument to this is the belief that only the wealthy actually use stocks and bonds as a vehicle for saving, and thus higher taxes on capital gains would be extremely progressive (which many people see as a good thing). This opinion is certainly valid, but I believe the correlation to growth trumps this argument, as growth raises the standard of living across all income brackets.
On regulation, I think the most important aspect is the lack of regulation on capital AND labor flows.
While capital, in general, flows freely, labor does not. At all. Think of how difficult it is for immigrants to enter the US. The US does not even let all of applicants for H1B Visas (highly skilled workers) into the country.
2. You're right that serious economists do not posit this theory. The problem is the political rhetoric in America for the last 30 years HAS been positing this theory. If you look at the political activity, it's been repeal after repeal of regulations, while using this theory of perfect equilibrium and efficiency as their rationale.
4. On dumping, what I'm talking about is the first situation, but also a third situation that wasn't mentioned. The third situation is that a government subsidized industry, like agriculture, is able to grow products at a loss, remain profitable due to subsidies, AND dump their excess product on a foreign market, thereby glutting it and ruining the livelihood of local producers. Take for instance what American dumping of goods has done to Haiti's native farmers.
I don’t think “repeal after repeal” has occurred. I think, in fact, that most trade economists are frustrated with the lack of progress being made. Has the Doha Round accomplished anything major since 2001? Your issue in point four seems to strongly agree with me. Government intervention (subsidies are very much a protectionist measure) has created this problem. Fewer “regulations”, and by that I mean interventionist measures, would see many US farms unable to compete with farms in other countries.
This, again, is the central idea of free trade. Countries will do what they are best at. The US should not be farming, because, even with our technological advantage, farmers are unable to remain competitive with farmers in other countries. Who loses? Farmers in the US. Who gains? Everyone in the US benefits from cheaper food, even the ex-farmers. Farmers in the foreign country gain, and spur growth in that country as well (if you have farms, you need whole related industries such as efficient transportation to support them).
Now, consider what is happening in today’s world, where the US farm market is highly protected and highly subsidized. Prices are still low, because the goods are sold at a loss (often even in the US) but consumer don’t see that gain as a real increase in purchasing power because their taxes are paying for the subsidy. Who gains? Farmers keep their jobs. Who loses? All of the farmers in other countries who now can’t farm.
3. I should have been more clear. I am talking about the political rhetoric in America and the movement toward globalization and deregulation that has been implemented in the political arena of America. OFC economists have accounted for everything under the sun. There are tons of economists out there postulating pretty much every possible permutation I could think of. I don't mean to say the entire field of economics and capitalism is wrong or stupid. What I mean is the political will of America has been trending towards deregulation, free markets, and the flow of capital and labor out of America (labor more than capital).
What are OFC economists? I’m not familiar with that acronym, and google doesn’t want to tell me. I think is difficult to say with any certainty what the political will toward free markets in America is. Surveys I (just) found on the internet (a great source, i know) show that, on average, only one in three Americans believe opening up to trade is a bad idea. So, based on such surveys, you would be right.
I believe, though, that those surveys are likely misleading. I think free trade is something most people support when it is discussed abstractly, but not when it is close to becoming reality. Why? For the same reasons stated in my first post: The losers from trade are a lot more visible than the winners. Furthermore, even if the political will of the people is moving towards more openness, it is still almost certainly to be slowed by the presence of that vocal minority. That minority harmed by trade will lobby their congressional delegation aggressively. Their voice is amplified by the fact that many domestic industries who stand to lose the most from openness, such as the agriculture or automotive industries, have some of the largest lobbying groups.
Also, with the first situation, there is a window of time between monopoly and reentry in the market by a competitor. It's a rare situation in which the competitor reenters and immediately takes an aggressive percentage of market share. There is some significant lag time involved and that's why a lot of times a monopolizing entity can play this juggling game of hiking up prices and then dropping them again to squeeze out any legitimate threat, while skimming hefty profits in the back and forth adjustments. Also, over time, many competitors would see this as an industry with significant barriers to entry and high risk knowing that this monopolizing entity will just drop prices when they try to enter the market. It deters competition from ever entering
.
This is a good response. One might suggest that, although domestic firms (in the foreign country) will be unable to enter the market due to the price warfare, other firms in other countries (maybe even a different US firm) will be able to enter.
5. On the giants issue, I was thinking more in terms of banking. Whereby the bank with more deposits has a significant advantage over a smaller bank, solely because they have more capital and thereby a great advantage in competing. Sort of like holding the most chips at a poker table. It doesn't guarantee a victory but it is definitely an advantage.
You are right in that this is probably a bad example to use for every industry as it does not apply to all of them and in many cases, the more efficient one would force the other one to scale back.
I can see where you were coming from with the market-share idea now. A more efficient bank, though, should still be able to offer higher returns and lower interest rates, thus drawing people away from the larger banks.
6. I blame the economic collapse more on a combination of factors including deregulation, but I should have been more specific here. And in retrospect, you are right, this was a poorly constructed OP. What I should have said was that deregulation as a political rhetoric and disposition was one of the leading factors of this economic crisis. This is why I think so:
The monetary policy engineered by Greenspan was extremely loose. The political rhetoric of the time was that deregulation of banking was a good thing. This led to a very low cost of borrowing, AKA money is cheap. This environment of cheap money combined with the repeal of laws banning ARMs and loans of that nature led to the bubble in the housing market and ridiculous overexposure in the banking industry.
So yes, in the end, I blame banking regulation, but inherent in that argument is the belief that less regulation is a good thing.
Just to note for fun: during the Clinton-Bush elections conservatives lambasted Greenspan for being far too tight with US monetary policy during the 1987 stock market crash and the 1991 recession. Greenspan’s loose monetary policy leading up to the dot-com bubble is often seen as a necessary response to the Asian Financial crisis of 1997-98.
Just so you know, the low cost of borrowing follows directly in economic models from expansionary monetary policy, with or without the political rhetoric.
Where to place the blame is a fun game to play, as its often very easy to pick targets. Personally, I like to blame the bankers themselves, for lending to people who really didn’t have the money to service the loan, rather than the political or economic climate.
7. Again, I should have been more clear on this point. What I mean is that this a net loss in jobs for the American labor market. And yes, I'd say this is a protectionist sentiment. The corporations say that this is a good thing because the price of goods is cheaper. Yet, if Americans lose jobs and get cheaper goods, what do we end up with? A guy who makes $0 a day is not going to care if sneakers are $20 instead of $45.
My worry when it comes to manufacturing is that, yes there are people needed to maintain the robots, machines, etc but over time I think that number has decreased. Also, these jobs require more and more skilled labor. I'm wondering if these jobs will someday reach a threshold in which only the top 30% of the population are able to even perform them. What would the other 70% of America do then? But maybe this is an irrational fear. Technology is supposed to make things easier.
These fears are ungrounded (but perhaps fueled by the current economic situation). Look at the historic unemployment rate in the US. Look at the historic unemployment rates in other developed countries. They don’t tend to change much. Also look to the average level of educational attainment in developed countries. In the span of the last fifty years, high school graduation rates have increased from 50% to 90%. Bachelor’s degree attainment has risen from 5% to 30% (source US Census). It is also worth noting that many industries arising from technological innovation can’t even be fathomed. Fifty years ago no one could have known how large and important the computer industry would become. A hundred years ago most people had never seen a car.
8. Good point. I would agree that the income gap is materializing because of the accelerated growth among the rich, rather than a drastic decrease in the growth of the poor.
9. I agree that this is exactly the same parallel. In the past agriculture was replaced by manufacture. And now manufacture has been replaced by the service sector. But I wonder if the service sector is truly an adequate replacement for manufacture. Perhaps I am too ignorant of what the service sector entails or how it perpetuates its own growth, but as of now, I have sincere worries about the sustainability of America becoming a predominately service-sector based economy. I would love to hear your thoughts on this.
A thought experiment: say that 20 years in the future, every single person in the country is in the service sector. How could we have any goods, when we don’t create any tangible goods ourselves? Because our services will be used by the rest of the world. Other countries would pay for American architects, American managers and American interior decorators. Then, of course, we would have money, and a need for places to spend that money. So other countries would build stores and production plants in the US for us to buy from (which, since I can’t get away from at least some manufacturing even in a thought experiment, suggests it isn’t something to worry about).
Second, although manufacturing is declining, it is important to recognize that the focus of manufacturing is also shifting. Developed countries may be losing their blue collar manufacturing jobs in industries such as steel, but they are also gaining manufacturing jobs in high-tech equipment. Examples of such things might be scientific or medical instruments or fabrication of goods using nanotechnology. Less developed countries simply don’t have the infrastructure or technology to create such things.
10. About money disappearing. When the US uses that money to launch a missile at Afghanistan, I see that money as disappeared. When the US gives that money to some contractor who installs a toilet for $1,000 I see that as disappeared. When the US takes that tax money and shoves it into Fannie Mae to buy up toxic loans, I see that money as disappeared. While spending on infrastructure would be fantastic, I don't see a lot of the tax money being spent that way. Instead, I see corporate interests directing government spending into channels that don't return to the consumer.
First, a rebuttal. Money spent on a missile launched at Afghanistan may be a “waste” in terms of “not spending money on a valuable cause”, but the money doesn’t leave the system. The government is paying someone to build the missile, someone to launch the missile, and sustaining jobs for newscasters by giving them something to talk about on television.
That being said, this is one of my own biggest complaints about our current system. I see a very definite, very real lack of fiscal responsibility in our government today. But I don’t see it as the fault of corporations or free trade. Rather, I think this outcome results from the combination of our political system and human nature.
I think one way to help fix would be to institute term limits on congressional members. Limiting members’ turns could reduce the incentive to pander to voting blocks or lobbyists in one’s district or state.
As for human nature, I think much of the excess waste comes from the lack of human ability to properly value things we do not own. By that I mean I think that because the vast majority of money allocated by politicians is not their own, they pay less attention to how it is spent, and worry less about it being wasted.
A second aspect of human nature that I see as problematic here is the tendency to apply too high of a discount rate to future events. If you aren’t familiar with that term, it relates to the idea that a dollar tomorrow is worth less than a dollar today. Overly large deficits are problematic, social security is problematic, climate change is problematic. Yet no one will take a stand on any of them. This is because the negative effects of these problems will be felt in the future, and people place less emphasis or value on events that will take place in the future.
11. Your numbers are correct. But the wealthy used to pay even MORE than this. And I think they should pay more.
They did indeed. Up to and in excess of 90% of income. But as for needing to pay more? That’s a matter of personal opinion. I am typically against taxation and regulation (go figure...), but I wouldn’t be against higher levels of income tax on the wealthy PROVIDED: more brackets are created for higher levels. Currently, all incomes in excess of around $370,000 are taxed at the same rate. However, there are huge differences in the ability to pay that rate among high-income earners. While high incomes were taxed higher a century ago, the tax brackets were also set higher. The highest tax brackets were typically reserved for incomes in excess of $1,000,000 adjusted for inflation (source IRS)
Anyhow, hope the numbering I did wasn't too confusing. I'm not good with quotes so I didn't want to go in and try to respond to each quoted block of text. Thanks again for responding and I will admit that you proved me wrong or showed that I needed to more greatly clarify on a number of points.
Still, I hold serious doubts about the virtues of shifting to a service based economy and whether that is truly beneficial for the people.
Also, I hold serious doubts about the fiscal policy of the US government.
I also hold serious doubts about the way taxation of corporations are handled.
But most of all I have serious doubts about capital and labor flows. While it is easy to say that everyone will move into the service sector and be happy, I've yet to see the service sector actually provide enough jobs to replace all the ones lost in agriculture and manufacture.
What are your doubts about the taxation of corporations? And capital and labor flows? As for providing enough jobs, look at historical unemployment figures (bearing in mind that we are in a deep recession right now). Even though the population in the US has increased dramatically, and the composition of our economy has changed, unemployment has remained remarkably constant.
One final thing I need to note, in case you check these facts: If you look at a graph of historical unemployment in the US, there is a good chance it will look anything but constant (see BLS) for just such an example. When I say the rate is near constant, I am referring to the structural unemployment rate, and not including frictional unemployment. Frictional unemployment will vary with the business cycle (booms and busts), and is what is causing the movement in such charts. The US structural unemployment rate has remained around 3%. (in contrast to many other countries, where it either varies a great deal, or is much higher).
I have been following the community for a long, long time. Mostly reading, and very seldomly commenting on anything. Seeing that the community is nowadays mature enough for this issue to be talked about in somewhat civil terms, I absolutely must make a contribution regarding it.
If any of you is actually interested about the subject, and wishes to devote a few weeks reading and doing the neccessary fact checking, I wholeheartedly suggest you to read "The Web Of Debt" by Ellen Hodginson Brown. (revised and expanded with 2008 update).
Reading that book will deliver the neccessary information for you to shake away any doubts regarding the issue. It is a long, long book, but it has been written in a manner captivating enough to interest even the people who do not major in economics. It might be the most important book you will read in your life.
It is hard to push anyone to read a book, often even real life acquintances balk at suggestions regarding books, if it doesn't fall in the genre they're used to read. Many people don't have the urge to know too much, and it's their choice. However, if you wish to seek the truth through so many layers of disinformation, you will do yourself great help by allocating the time needed to read this book. The word 'eye opener' is reserved for books like this. There are more, but I don't want to spam this thread with too many names. This is the most important of them all, and at some point I hope that She will get the praise she deserves for compiling this piece and having the guts to present it to everyone.
This is important enough to mandate its own thread, but I don't want to be too pushy.
On January 28 2010 05:55 Klockan3 wrote: And no matter how much money a company is giving to the parties if it turns out that the party will help empowering this company to disproportional degrees the people wont tolerate it and will shoot them down the next election. And it isn't even plausible for it to happen, since the parties know that if they go too far out of line in terms of this they will for sure lose the next election, so they don't since it wouldn't be helping their self interest to do so.
And no, money is not winning the elections. What wins elections is support from the people, the more support the party have the more money they will get. Or, in this case correlation do most likely not mean causation since we have a very strong rational argument why popular support and financial support should correlate.
And about the current "crisis", is anyone starving in any of the western countries? Do anyone lack the money to buy clothes? No, not really, what gets put on hold is something like a new plasma TV, mostly just forcing people to consume a bit less luxury wares than they usually do.
One of the most lol post I've ever read on TL. I actually lol'd so hard irl that I woke my gf up, how's the kool-aid up in Sweden, Klockan?
On January 28 2010 08:56 Virtue wrote: The only issue with the current system to me is that the division of wealth has not been really at all balanced by the irs in the past 30 years taxing the rich has become less and less of an ability and a stronger reliance in getting the money when people die at least in the US. So we get the filthy rich and really poor in the US with a getting by middle class. That's my only complaint.
You're only complaint is that the current system causes massive inequality and unemployment then. Fair enough.
Capitalism doesn't promise equality, but it does give you the opportunity to make the most of yourself according to your ability.
this recession isn't the first one that ever happened. anti trust regulation exists for a reason, and should be enforced. People in Flint are bad off compared to people in other cities in this country, not compared to the world as a whole. And picking out one of the worst off places in the country and using it to show the whole thing has failed? meh
On January 28 2010 14:02 StorkHwaiting wrote: To Zero:
Thanks for the lengthy response and your time and effort are much appreciated
1. By taxes I mean things like tax write-offs by corporations through giving to charities/NPOs that end up looping right back to the corporations, the evasion of corporate taxes by giving out huge bonuses to their executives so they can post them as operating expenses, the constant tax cuts on capital gains, and the increasingly labrynthine ways that the top tax bracket finds to evade paying their actual taxes. There are of course a great deal more, but in essence I think the problem stems from corporations and the highest income brackets consistently avoiding taxes through tax lawyers and armies of accountants, while the middle and lower class can't afford these kinds of resources to avoid paying their taxes.
On regulation, I think the most important aspect is the lack of regulation on capital AND labor flows.
2. You're right that serious economists do not posit this theory. The problem is the political rhetoric in America for the last 30 years HAS been positing this theory. If you look at the political activity, it's been repeal after repeal of regulations, while using this theory of perfect equilibrium and efficiency as their rationale.
3. I should have been more clear. I am talking about the political rhetoric in America and the movement toward globalization and deregulation that has been implemented in the political arena of America. OFC economists have accounted for everything under the sun. There are tons of economists out there postulating pretty much every possible permutation I could think of. I don't mean to say the entire field of economics and capitalism is wrong or stupid. What I mean is the political will of America has been trending towards deregulation, free markets, and the flow of capital and labor out of America (labor more than capital).
4. On dumping, what I'm talking about is the first situation, but also a third situation that wasn't mentioned. The third situation is that a government subsidized industry, like agriculture, is able to grow products at a loss, remain profitable due to subsidies, AND dump their excess product on a foreign market, thereby glutting it and ruining the livelihood of local producers. Take for instance what American dumping of goods has done to Haiti's native farmers.
Also, with the first situation, there is a window of time between monopoly and reentry in the market by a competitor. It's a rare situation in which the competitor reenters and immediately takes an aggressive percentage of market share. There is some significant lag time involved and that's why a lot of times a monopolizing entity can play this juggling game of hiking up prices and then dropping them again to squeeze out any legitimate threat, while skimming hefty profits in the back and forth adjustments. Also, over time, many competitors would see this as an industry with significant barriers to entry and high risk knowing that this monopolizing entity will just drop prices when they try to enter the market. It deters competition from ever entering.
5. On the giants issue, I was thinking more in terms of banking. Whereby the bank with more deposits has a significant advantage over a smaller bank, solely because they have more capital and thereby a great advantage in competing. Sort of like holding the most chips at a poker table. It doesn't guarantee a victory but it is definitely an advantage.
You are right in that this is probably a bad example to use for every industry as it does not apply to all of them and in many cases, the more efficient one would force the other one to scale back.
6. I blame the economic collapse more on a combination of factors including deregulation, but I should have been more specific here. And in retrospect, you are right, this was a poorly constructed OP. What I should have said was that deregulation as a political rhetoric and disposition was one of the leading factors of this economic crisis. This is why I think so:
The monetary policy engineered by Greenspan was extremely loose. The political rhetoric of the time was that deregulation of banking was a good thing. This led to a very low cost of borrowing, AKA money is cheap. This environment of cheap money combined with the repeal of laws banning ARMs and loans of that nature led to the bubble in the housing market and ridiculous overexposure in the banking industry.
So yes, in the end, I blame banking regulation, but inherent in that argument is the belief that less regulation is a good thing.
7. Again, I should have been more clear on this point. What I mean is that this a net loss in jobs for the American labor market. And yes, I'd say this is a protectionist sentiment. The corporations say that this is a good thing because the price of goods is cheaper. Yet, if Americans lose jobs and get cheaper goods, what do we end up with? A guy who makes $0 a day is not going to care if sneakers are $20 instead of $45.
My worry when it comes to manufacturing is that, yes there are people needed to maintain the robots, machines, etc but over time I think that number has decreased. Also, these jobs require more and more skilled labor. I'm wondering if these jobs will someday reach a threshold in which only the top 30% of the population are able to even perform them. What would the other 70% of America do then? But maybe this is an irrational fear. Technology is supposed to make things easier.
8. Good point. I would agree that the income gap is materializing because of the accelerated growth among the rich, rather than a drastic decrease in the growth of the poor.
9. I agree that this is exactly the same parallel. In the past agriculture was replaced by manufacture. And now manufacture has been replaced by the service sector. But I wonder if the service sector is truly an adequate replacement for manufacture. Perhaps I am too ignorant of what the service sector entails or how it perpetuates its own growth, but as of now, I have sincere worries about the sustainability of America becoming a predominantely service-sector based economy. I would love to hear your thoughts on this.
10. About money disappearing. When the US uses that money to launch a missile at Afghanistan, I see that money as disappeared. When the US gives that money to some contractor who installs a toilet for $1,000 I see that as disappeared. When the US takes that tax money and shoves it into Fannie Mae to buy up toxic loans, I see that money as disappeared. While spending on infrastructure would be fantastic, I don't see a lot of the tax money being spent that way. Instead, I see corporate interests directing government spending into channels that don't return to the consumer.
11. Your numbers are correct. But the wealthy used to pay even MORE than this. And I think they should pay more.
Anyhow, hope the numbering I did wasn't too confusing. I'm not good with quotes so I didn't want to go in and try to respond to each quoted block of text. Thanks again for responding and I will admit that you proved me wrong or showed that I needed to more greatly clarify on a number of points.
Still, I hold serious doubts about the virtues of shifting to a service based economy and whether that is truly beneficial for the people.
Also, I hold serious doubts about the fiscal policy of the US government.
I also hold serious doubts about the way taxation of corporations are handled.
But most of all I have serious doubts about capital and labor flows. While it is easy to say that everyone will move into the service sector and be happy, I've yet to see the service sector actually provide enough jobs to replace all the ones lost in agriculture and manufacture.
Let us take this from the Austrian approach, or the only Free-Market School of Economic Thought left in the world. (To wit; our only member in the whole Government is Ron Paul)
First off, you cannot have a Free-Market Economic System without a Sound-Commodity Currency. Any other currency is inherently fraudulent and inflationary. Moreover, any other currency is inherently and necessarily an intervention in the markets -- hence, not a Free-Market. Since Monetary Policy is the bedrock of any Economic Foundation one must first look here.
So, with this we come to Central Banking and the Federal Reserve. What is the purpose of the Federal Reserve? Well, it's chartered mandate was to facilitate stable prices and to enable near as can be full employment. Well, certainly, over its 97 year period it has reigned through long, deep, Depressions from 1929 to 1946, from 1971 to 1981, from 2008 and onward. Moreover, this is only looking at the extenuated busts. The preceeding periods were the Booms and in worse cases, very small recessions in which corrections were not allowed to happen. In essence the system goes -- Boom - tiny correction straight into - Boom -- into Depression. In essence, our very Monetary System is built on getting a drunk man, drunker. Obviously when you wake up the next morning you aren't going to feel too well.
I'm not sure if you are aware of the Austrian Theory of the Business Cycle, but interest rates are used to coordinate resources. Low interest rates are supposed to represent an increased savings freeing up capital to be used in the lower orders of production (Those areas which are far away from the consumer -- Mining, Steel Production, etc.), which are long-term investments. Higher interest rates are supposed to represent less savings and a consumer demand for higher order of production goods (Those which are closest to the consumer -- End products in Wal-Mart, Target, Gamestop, on the Car-lots, etc.). The market coordinates this allocation of capital via Interest rates as we have seen. What happens with the Federal Reserve and any Central Bank however, is that they artificially lower or raise interest rates. Justification for these lowering and raising of rates in most cases has to deal with the political ramifications. There is honestly no central authority capable of knowing the homogenous interest rate of an entire Naton, nor is it even intellectually reasonable because for instance, you may have higher rates of saving in Florida, than in New York, or vice versa. Not only that, the natural interest rate can only be achieved through a fully free-banking system with sound-commodity currency which cannot be inflated at the Politicians whim. What happens when you have artificially low interest rates is that both the lower and higher orders of production are reaching for the same scarce resources. Since we know we do not have unlimited resources, what always and must always happen is that the resources are expended, and all the projects under-taken are left incomplete, not-profitable, and bankrupt. This is the bust that must always come. As you can see, at the very onset we do not have a Free-Market Economy, nor do the Orthodoxy in any single Nation in the world even bring this up.
Let's now look at the ramifications for the busts. The longer the booms last, the larger the misallocation of scarce resources. What happens is that these scarce resources are used up, for no profitable purpose. This makes everyone poorer. Let's take a quick analogy. Let's say you take out a 30 year loan to build a new manufacturing plant. Obviously you are going to invest in long-term projects when interest rates are at 1% because over a 30 year period that 1% interest rate will save you enormous costs even compared to a 2% interest rate. So, you undertake this long-term project expecting to see some returns at the end because you believe due to the amount of freely loanable funds that people have money to spend on the future. Fast forward seven years down the road and your project is completed, while at the same time the country writ large has been undertaking these similar lower order of production projects. If you can even complete your project with the initial loan due to price increases in capital goods from a rush of demand (Boom), you are left with an exhausted population which does not have the required funds to purchase your goods (No savings, left with over-burdening Credit). Why is there no savings? At 1% interest rates, no one in there mind would save. Time preference dictates that just by holding on to money now, you lose purchasing power tomorrow (the next day). This is also why huge speculative bubbles arise in the stock market, because to even recoup your loss of purchasing power from the inherent inflationary Fed policies (You have to print money to keep interest rates at 1%), you must speculate. So, now the bust happens. The Economy has misallocated scarce resources and now must reallocate them into the profitable companies, projects, entreprenuers, etc. With an increase of interest rates this capital is now freed up to be saved. Yes, the bust hurts, but it is the necessary correction to the Boom. The only way to prevent the Boom-Bust cycle which destroys wealth (capital), is with 100% Reserve Banking, Free-Banking, and a Sound-Currency (Preferrably a Gold/Silver float). Even then, you cannot totally prevent a Boom-Bust, because misallocation of resources will always happen because of subjective valuations. The entreprenuer will not always be right, however, these hiccups will be local and fleeting at the worse.
Not only that, the most insidioux tax is the Inflation Tax. Since prices do not immediately respond to the first infusion of new money, those at the very forefront of receiving this newly printed (or in today's case, newly added zero on a computer), have increased purchasing power without producing one single good or service. It is fraud. It is debasement. It is theft. You become poorer. When that money finally trickles down to you, prices of goods and services will have exploded. Your purchasing power will have been eroded. This is the silent transfer of wealth from the middle class, poor, and upper class to the affluent and to those who have political connections. This is why those who call for inflationary policies are themselves demanding to be robbed![/u][/i]
So, with this cursory expose of how at the very onset we do not have a Market-Economy, but a Centrally Planned, Statist ran Economy, we can move on to answer some of your specific objections (By the way this has been the case since the turn of the 20th Century).
1. Taxation --
All taxation is inherently and necessarily theft. It is the violent appropriation of income from one individual to another at the expense of the first individual. From a wholly moral position, we must be against theft -- taxation. Taxation in every case is a distorting factor in the market.
As for the Austrian Perspective on anaylsis I will defer to Rothbard in Man, Economy, State - Power & Market (p. 910):
"There has been a great deal of controversy among economists on how to approach the analysis of taxation. Old-fashioned Marshallians insist on the “partial equilibrium” approach of looking only at a particular type of tax, in isolation, and then analyzing its effects; Walrasians, more fashionable today (and exemplified by the late Italian public finance expert, Antonio De Viti De Marco), insist that taxes cannot be considered at all in isolation, that they may be analyzed only in conjunction with what the government does with the proceeds. In all this, what would be the “Austrian” approach, had it been developed, is being neglected. This holds that both procedures are legitimate and necessary to analyze the taxing process fully. In short: the level of taxes-and-expenditures may be analyzed and its inevitable redistributive and distortive effects discussed; and, within this aggregate of taxes, individual types of taxes may then be analyzed in isolation. Neither the partial nor the general approaches should be overlooked."
Now, with that said, not only do we have to look at Taxation as the actually specific tax on an individual, or business, but in the aggregate terms, we must also have to look at Government Spending.Merely, lowering the tax rate, while increasing spending, or failure to reduce spending is in actuality a large tax increase and tax burden. We also know, that every tax levied, is a resulting increase of cost in that sector. If you tax ALCOA 25%, ALCOA will similarly raise their prices to a level which nets them a profit. In many cases this taxation puts undue burden on businesses and in the convening period puts them into bankruptcy, or more generally (which is to say, what most often happens), a reduction of the amount of consumer or manufacturing goods produced. This leads to a decrease in your standard of living, and a resulting higher unemployment rate. Let us this analogy from Rothbard MES, PM (p. 911):
"Thus, suppose the government taxes the betel-nut industry one million dollars in order to buy paper for government bureaus. One million dollars’ worth of resources are shifted from betel nuts to paper. This is done in two stages, a sort of one-two punch at the free market: first, the betel-nut industry is made poorer by taking away its money; then, the government uses this money to take paper out of the market for its own use, thus extracting resources in the second stage. Both sides of the process are a burden. In a sense, the betel-nut industry is compelled to pay for the extraction of paper from society; at least, it bears the immediate brunt of payment. However, even without yet considering the “partial equilibrium” problem of how or whether such taxes are “shifted” by the betel-nut industry onto other shoulders, we should also note that it is not the only one to pay; the consumers of paper certainly pay by finding paper prices raised to them."
As you can see the violent interference in the market has more consequences than originally seen (and all of these are bad for you, the consumer, investor, individual).
Now, let's answer your question about taxing capital. I have found the only people who advocate a tax on capital are the people who do not understand what capital is, and what is accomplishes. Capital is savings. Not only do you advocate a tax on the very first turn (Actually receiving your wages), now you also want to tax savings (investment) with those all ready taxed wages. This is a double whammy. Let's further look at what capital achieves. As Rothbard explains (And I might add here Irwin Schiff's How an Economy Grows, and Why it Doesn't is a great simple piece of work that is quite simple to the laymen) in MES PM (p. 47):
"With the nature-given elements limited by his environment, and his labor restricted both by its available supply and its disutility, there is only one way by which man can increase his production of consumers’ goods per unit of time—by increasing the quantity of capital goods.
Further he goes on to state:
"Beginning with unaided labor and nature, he must, to increase his productivity, mix his labor energy with the elements of nature to form capital goods. These goods are not immediately serviceable in satisfying his wants, but must be transformed by further labor into lower-order capital goods, and finally into the desired consumers’ goods.
So, what you are proposing as a tax on capital, is a tax on productivity. In essence, you are punishing people who are directly responsible for your standard of living. Without a resulting increase in capital goods (Productivity), we would all be much worse off. Think of it has a small village of twenty people. These twenty people to sustain themselves go out and catch fish with their hands (no capital goods). In doing so, they can only sustain themselves day by day. They have a low standard of living. Now, two of the villagers gets the idea to build a net. Building a net takes time and labor. Those two people will not feed themselves for two days in order to invest in the future and an increase in productivity (increase in standard of living). So, they get to work, and in two days time they have completed their nets. The rest of the villagers look at them puzzled. "What is this contraption", they exclaim. The two capital good producers, look at themselves and look back at the village and proudly put forth "You will see in time." So, they head out in the river and lo- and behold- they catch three fish each. Now, this has freed up time in the future for, future investments and capital production. Now they have two free days. The other villagers look at them in excitement! I need not go further, but it clearly illustrates the direct enhancements of all of society (Eventually, this freed up time, allows for them to produce nets for everyone, which increases everyones productivity, and ad infinitum)! Capital accruement and investment is the sole reason for our increases in standard of living. To want to tax that, is ludicrous!
2. As you can see the Orthodoxy in America and indeed the world, is not one of Free-Markets, but one of Centrally-Planned Socialist/Fascist Economies. Our world today is not a failure of Free-Markets, but of a failure of Statism. Not only that, regulation has increased tri-fold in the last 10 years. Look at the IRS, EPA, FDA, State regulatory agencies, SEC (Yes, they had more regulations in 2004 than they had in 1992 for example), FDIC, etc.
3. Again I refer to #2. Rhetoric means nothing. Action, consequences, policies, etc. mean everything. We do not have a Free-Market Economy, not even close!!! Globalization is also a part of the Centrally-Planned Economy. Look at NAFTA, GATT, CAFTA, WTO, etc. This is not Free-Trade. This is Neo-Mercantilism regulated, managed, etc. trade. Free-Trade requires a one page agreement between Nation-States, not 2,000+ pages of regulations. Moreover, if we have been pushing for more Globalization how come the US still has an inordinate amount of embargoes, sanctions, and other hostile trade policies to many many countries?
As Jeffrey Tucker so eloquently put in Free Market Vol. 14 No. 10:
"One peculiar aspect of the 1993-95 trade debate was the contradictory purposes--or so it seemed--of Nafta and Gatt. They embrace different theories of how the U.S. should conduct trade policy. The "bilateralistists" think that the U.S. should negotiate trade with one country at a time. The "multilateralists" say that leads to protectionist alliances; what we really need is one big agreement with the world.
Nafta was a species of bilateralism: a deal first negotiated between the U.S. and Canada and then extended southward. To be more specific, Nafta was an instance of regional mercantilism. The U.S. would be master of the North American continent, granting preferential trade status ("regional content" laws) to any goods produced in the signing countries, while penalizing goods from outside.
The treaty was as much about protection as trade. In the imaginations of Nafta's Washington theorists, this would give "us" (the U.S., Canada, and Mexico) a boost of market power over "them" (Asia and Europe), which would allow "us" to compete and win in the global competition for resources and markets. The point of Nafta was to allow "us" (which really means the government and its most closely connected banks and corporations) to throw "our" weight around the rest of the world.
The Clinton administration and its Republican allies adopted this rhetoric in the closing days of the debate. Even while denouncing protectionists, they made an openly protectionist appeal that presented the international trading arena as a battlefield, not a setting for mutual economic advantage.
Indeed, the spirit and the letter of Nafta represented an egregious violation of free trade. In real free trade, the government does not establish "regional content" rules or browbeat foreign governments into deals with approved U.S. corporations, for example. The government's only role is to allow business and consumers to trade with whom they choose."
I'm sorry I am out of time for right now. I will continue on the rest of your points when I get a chance.
In the first read through, I'm already noticing analysis using an incomplete model for competition and capital, a pessimism for social learning of virtues, and a impatient demand for immediate results.
It is correct that consumerism doesn't really work. It doesn't follow that we need the government to correct for the excess of consumerism. Let the people feel its consequences for 20 years and the next generation will discover the virtues of prudence, thrift, and hard work once more. Teaching virtue doesn't happen over night. You could demand government try to teach that virtue, but I doubt it will succeed in teaching virtues that it itself does not possess.
In a few years, Chinese workers will deserve to earn a higher income than their American counterparts. Whether that imbalance will result in American wages dropping to match those in China or in Chinese wages rising above American nominal values, it all won't matter. Inflation and exchange rates will adjust away the differences in purchasing power.
It works in small scale, but you're right about it being plagued by corruption. My mom has her masters in psychology, but instead of using that she makes over $300k/yr running her own business. She kept putting back into her own business and growing it up rather than just taking the profits and buying 9 yachts.
I'm too lazy to read the whole thread as there are numerous walls of text. In the OP i don't see many solutions given for the supposed problems. In the US we don't even have a pure capitalist free market economy.
On January 28 2010 06:48 Boblion wrote: Btw StorkHwaiting i don't understand how people can disagree with you as you are stating the obvious. Globalization raping the lower middle class in Western countries is common knowledge but it is funny to see all those guys with an eco degree in the thread raging because you are discussing an Economic issue lol. Economy is as scientific as Sociology, History or Political science. I mean all those guys with Phd, Nobel prizes etc ... they weren't able to predict the crisis. I don't want to be mean but there many people ( Stiglitz, Greenspan etc ... ) who are way more qualified than anyone in this thread and guess what they were completly wrong. So my advice for guys like Caller is to get off of their high horse because having an eco degree is like being C on Iccup and thinking that you are the shit whereas you are just a stupid copycat who has learnt a couple of build orders / eco models. Be humble.
Perhaps you are not familiar with the Austrian School of Economics, which is Economics. The Austrian school is the only scientific Economic School of Thought. This is why, Rothbard called Economics the "dismal science". :p
Go on Youtube and type in: Peter Schiff was Right
Now, you can go to Texas Straight Talk, or Ron Paul Library and check out speeches of Ron Paul from 1997 and 2003 excoriating the coming busts in both .com and housing respectively. Not only that, Lv Mises excoriated the World in 1927 about the coming economic calamity. The Austrians are the only ones who consistently predict every Boom-Bust because we are the only ones to have a theory to explain it. Moreover, we are the only Free-Market school of thought left. Perhaps more people need to go back and read Cantillon, Say, Turgot, Bastiat, Molinari, School of Salamanca, and other liberal Laissez-Faire theorists. Moreover, Jim Rogers and Marc Faber predicted the same mess.
What do all of these people have in common? They are all Austrians.
I liken Monetarists/Keynesians/Neo-Classicists as dabbling in Astrology while us Austrians do the Astronomy work. Of course, looking through the glass of Astrology you wouldn't call it a science, but through the lens of Astronomy, you would.
Come on, Keynes is the fool who said that saving doesn't matter because in the long run we are all dead. He also blamed ups and downs in the market on "animal spirits".
On January 29 2010 05:58 Undisputed- wrote: I'm too lazy to read the whole thread as there are numerous walls of text. In the OP i don't see many solutions given for the supposed problems. In the US we don't even have a pure capitalist free market economy.
In the US we do not have Capitalism. In the US we have Fascism with a mix of Socialism.
Kusimuumi If any of you is actually interested about the subject, and wishes to devote a few weeks reading and doing the neccessary fact checking, I wholeheartedly suggest you to read "The Web Of Debt" by Ellen Hodginson Brown. (revised and expanded with 2008 update)..... This is important enough to mandate its own thread, but I don't want to be too pushy.
I very much like the civility of your tone, so I apologize in advance if the following comes off too harshly:
Ad hominem attacks are generally a poor way to begin a debate, but in this particular case, I think one bears stating. Ellen Hodgson Brown’s credentials (from her own site) are: using “her research skills developed as an attorney practicing civil litigation”. She does not have a background in Economics. Furthermore, she states that she was “asked to join the legal team of a popular Tijuana healer”. That experience prompted her to trace the “suppression of natural health treatments”. She has written 11 books on alternative medicine.
I think, on the basis of such facts alone, that anything she has to say about US monetary policy can be summarily discounted.
Nevertheless, I read several of the excerpts from her book just to make sure. One particular gem:
Except for coins, all of our money is now created as loans advanced by private banking institutions — including the private Federal Reserve. Banks create the principal but not the interest to service their loans. To find the interest, new loans must continually be taken out, expanding the money supply, inflating prices — and robbing you of the value of your money.
This statement is indicative of the thoughts contained within the rest of the excerpts. If she had any economic background in Monetary Policy, or even Macroeconomics, she would realize how foolish statements like these sound.
Let me pick apart this paragraph for you:
Except for coins, all of our money is now created as loans advanced by private banking institutions –
Money is not created by the Federal Reserve. Money is created by the United States Mint. One of the ways many governments actually service debt is by printing money. (which is the opposite of creating money as a loan...) In fact, many unstable governments (and even some stable ones) have printed too much money too pay for their debts, devaluing there currency entirely. This is known as hyperinflation.
What the Federal Reserve deals in is US debt. The Federal Reserve either buys or sells government bonds (debt) to pursue expansionary or contractionary monetary policy. When the Federal Reserve sells a bond, it is issuing debt. When it buys a bond, it is reducing debt. These vehicles effect the money supply as follows: when the Reserve buys a bond with hard currency, that money is injected into the economy (expansionary). When the Reserve sells a bond for hard currency, money is taken out of the economy (contractionary).
The Federal Reserve displays aspects of both a public and private nature. It is public in the sense that it is within the government, and its members are appointed by other branches of the government. I tend to think of it much like the Supreme Court. It is private in the sense that it is not responsible to any branch of the Federal Government.
It should be extremely intuitive to see why this must necessarily be so. If politicians could order the Reserve to pursue the monetary policy they wanted, the result would be disastrous. You needn’t look beyond this forum board to see just how poor most people’s grasp of economic theory is (I don’t intend that to be a personal attack).
Banks create the principal but not the interest to service their loans. To find the interest, new loans must continually be taken out, expanding the money supply, inflating prices —
This part is just silly. Banks create the principal for their loans? Principal is the value of a loan minus the accrued interest (or the original balance of a loan. It doesn’t make any sense to say banks create the principal for their loans. That’s like saying you create the principal for your car loan because you took out a loan for your car.
As for not creating the interest: How would one even do that? What does that even mean? Why would anyone take out a loan if they could “create the principal” and could “create the interest”.
I think this part is a very poor (read unintelligent) take on the service of National Debt. The US issues more debt to finance its current debt (sort of like paying one credit card off with another).
While it is correct to say that if one does this, new loans must continually be taken out, the idea that it is “expanding the money supply, inflating prices” is just plain incorrect. When the Federal Reserve issues debt (Sells bonds), money is TAKEN OUT of circulation. This contracts the money supply (which is the opposite of “expanding the money supply). This raises the value of your currency, deflating prices.
and robbing you of the value of your money.
This is another extremely common populist outcry that is the bane of many an economist’s existence. Inflation does not “rob” people. It is not evil. Unpredictable high levels of inflation may sometimes be problematic, but the inflation rate in the US is very stable.
Your money is indeed worth less every year in the US as a result of inflation. But so is everyone else’s. Periods of unexpectedly high inflation hurt lenders, because it reduces the effective real interest rate (the total amount of debt is lower in real terms). Similarly, such periods help borrowers (like every American family, ever) because now their effective real debt burden is lower. When inflation is unexpectedly low, the reverse is true. To combat this, most loans are indexed to inflation. One final note: Inflation actually harms the wealthy most of all, because of the poor interaction between US capital gains tax laws with inflation (look at IRS capital gains tax law relating to inflation).
To conclude: Every single paragraph in the excerpts I read is exactly like this. Every sentence is simply not true, or contentious. If you want to choose a book to learn more about Monetary Policy, I would suggest getting an actual textbook. Romer or Mankiw are traditional favorites.
The problem with books like this is that the writers begin writing with an agenda. They start with an idea, and then set out to prove it. This leads to biased, inaccurate writing. What you will find in textbooks is simply an accounting of how economic policy works. Not politics, not an agenda.
If you have any questions about this, I would be happy to answer them.
On January 28 2010 06:48 Boblion wrote: Btw StorkHwaiting i don't understand how people can disagree with you as you are stating the obvious. Globalization raping the lower middle class in Western countries is common knowledge but it is funny to see all those guys with an eco degree in the thread raging because you are discussing an Economic issue lol. Economy is as scientific as Sociology, History or Political science. I mean all those guys with Phd, Nobel prizes etc ... they weren't able to predict the crisis. I don't want to be mean but there many people ( Stiglitz, Greenspan etc ... ) who are way more qualified than anyone in this thread and guess what they were completly wrong. So my advice for guys like Caller is to get off of their high horse because having an eco degree is like being C on Iccup and thinking that you are the shit whereas you are just a stupid copycat who has learnt a couple of build orders / eco models. Be humble.
Perhaps you are not familiar with the Austrian School of Economics, which is Economics. The Austrian school is the only scientific Economic School of Thought. This is why, Rothbard called Economics the "dismal science". :p
Go on Youtube and type in: Peter Schiff was Right
Now, you can go to Texas Straight Talk, or Ron Paul Library and check out speeches of Ron Paul from 1997 and 2003 excoriating the coming busts in both .com and housing respectively. Not only that, Lv Mises excoriated the World in 1927 about the coming economic calamity. The Austrians are the only ones who consistently predict every Boom-Bust because we are the only ones to have a theory to explain it. Moreover, we are the only Free-Market school of thought left. Perhaps more people need to go back and read Cantillon, Say, Turgot, Bastiat, Molinari, School of Salamanca, and other liberal Laissez-Faire theorists. Moreover, Jim Rogers and Marc Faber predicted the same mess.
What do all of these people have in common? They are all Austrians.
I liken Monetarists/Keynesians/Neo-Classicists as dabbling in Astrology while us Austrians do the Astronomy work. Of course, looking through the glass of Astrology you wouldn't call it a science, but through the lens of Astronomy, you would.
Come on, Keynes is the fool who said that saving doesn't matter because in the long run we are all dead. He also blamed ups and downs in the market on "animal spirits".
Oh so the Austrians have predicted the last crisis ? I think i have missed something o,o Eh i guess that if i was talking with a Keynesian or a Monetarist he would tell me the same thing. As a wise man said "an economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today". When it comes down to Human Sciences i don't think that we are advanced enough to find the truth ( if a truth exists lol ) and even predictions are often inaccurate or false. I think we will have to stick with caricatured models for a long long time. It won't prevent smart kids to think they are right though :o
On January 29 2010 06:52 ZeroJumps wrote: Your money is indeed worth less every year in the US as a result of inflation. But so is everyone else’s. Periods of unexpectedly high inflation hurt lenders, because it reduces the effective real interest rate (the total amount of debt is lower in real terms). Similarly, such periods help borrowers (like every American family, ever) because now their effective real debt burden is lower. When inflation is unexpectedly low, the reverse is true. To combat this, most loans are indexed to inflation. One final note: Inflation actually harms the wealthy most of all, because of the poor interaction between US capital gains tax laws with inflation (look at IRS capital gains tax law relating to inflation).
You'd be better served by just explaining that the burden of inflation hurts rich people more than poor due to the aggregate losses, rather than trying to explain capital gains. -10% of a billion dollars is a lot more than -10% of $100 dollars. Still, by the very nature of being rich, rich people are more buffered to the pains of losing their money than poor people are. Therefore, while inflation hurts rich people more, poor people are much more sensitive to the effects.
The caveat to this effect is the fact that the vast majority of poor people's incomes are spent just trying to pay the costs of life. Whereas, rich people have a great deal of their income that can be constantly invested to grow more money.
Therefore, not only are rich people more insulated against the losses caused by inflation, but they have greater means to counteract and neutralize the effects of inflation. So, really, your answer lacks a ton of nuance. While the populist theories are alarmist and not quite right, they do capture the essence of what actually occurs with inflation. The poor people's money is siphoned off and they have no way to recoup it. The rich people's money is siphoned off as well, but they have far greater options to combat inflation. They can invest. All most poor people can do to combat inflation is take on another job.
Also, you are flat out wrong that every American family ever is a borrower. Credit card debt is a relatively new phenomenon. Before then, the only real borrowing was a house mortgage. And a family that rents would effectively owe nothing. Therefore, it's rather trite to claim that inflation is good because everyone's debt burden would be lowered. And you fail to state that while debt burdens may be lower, the actual cost of living will rise when the price index increases to meet inflation. At the same time, there is absolutely no guarantee that wages will rise with inflation. That is only a hoped for outcome.
Kusimuumi If any of you is actually interested about the subject, and wishes to devote a few weeks reading and doing the neccessary fact checking, I wholeheartedly suggest you to read "The Web Of Debt" by Ellen Hodginson Brown. (revised and expanded with 2008 update)..... This is important enough to mandate its own thread, but I don't want to be too pushy.
I very much like the civility of your tone, so I apologize in advance if the following comes off too harshly:
Ad hominem attacks are generally a poor way to begin a debate, but in this particular case, I think one bears stating. Ellen Hodgson Brown’s credentials (from her own site) are: using “her research skills developed as an attorney practicing civil litigation”. She does not have a background in Economics. Furthermore, she states that she was “asked to join the legal team of a popular Tijuana healer”. That experience prompted her to trace the “suppression of natural health treatments”. She has written 11 books on alternative medicine.
I think, on the basis of such facts alone, that anything she has to say about US monetary policy can be summarily discounted.
Nevertheless, I read several of the excerpts from her book just to make sure. One particular gem:
Except for coins, all of our money is now created as loans advanced by private banking institutions — including the private Federal Reserve. Banks create the principal but not the interest to service their loans. To find the interest, new loans must continually be taken out, expanding the money supply, inflating prices — and robbing you of the value of your money.
This statement is indicative of the thoughts contained within the rest of the excerpts. If she had any economic background in Monetary Policy, or even Macroeconomics, she would realize how foolish statements like these sound.
Except for coins, all of our money is now created as loans advanced by private banking institutions –
Money is not created by the Federal Reserve. Money is created by the United States Mint. One of the ways many governments actually service debt is by printing money. (which is the opposite of creating money as a loan...) In fact, many unstable governments (and even some stable ones) have printed too much money too pay for their debts, devaluing there currency entirely. This is known as hyperinflation.
What the Federal Reserve deals in is US debt. The Federal Reserve either buys or sells government bonds (debt) to pursue expansionary or contractionary monetary policy. When the Federal Reserve sells a bond, it is issuing debt. When it buys a bond, it is reducing debt. These vehicles effect the money supply as follows: when the Reserve buys a bond with hard currency, that money is injected into the economy (expansionary). When the Reserve sells a bond for hard currency, money is taken out of the economy (contractionary).
The Federal Reserve displays aspects of both a public and private nature. It is public in the sense that it is within the government, and its members are appointed by other branches of the government. I tend to think of it much like the Supreme Court. It is private in the sense that it is not responsible to any branch of the Federal Government.
It should be extremely intuitive to see why this must necessarily be so. If politicians could order the Reserve to pursue the monetary policy they wanted, the result would be disastrous. You needn’t look beyond this forum board to see just how poor most people’s grasp of economic theory is (I don’t intend that to be a personal attack).
Banks create the principal but not the interest to service their loans. To find the interest, new loans must continually be taken out, expanding the money supply, inflating prices —
This part is just silly. Banks create the principal for their loans? Principal is the value of a loan minus the accrued interest (or the original balance of a loan. It doesn’t make any sense to say banks create the principal for their loans. That’s like saying you create the principal for your car loan because you took out a loan for your car.
As for not creating the interest: How would one even do that? What does that even mean? Why would anyone take out a loan if they could “create the principal” and could “create the interest”.
I think this part is a very poor (read unintelligent) take on the service of National Debt. The US issues more debt to finance its current debt (sort of like paying one credit card off with another).
While it is correct to say that if one does this, new loans must continually be taken out, the idea that it is “expanding the money supply, inflating prices” is just plain incorrect. When the Federal Reserve issues debt (Sells bonds), money is TAKEN OUT of circulation. This contracts the money supply (which is the opposite of “expanding the money supply). This raises the value of your currency, deflating prices.
This is another extremely common populist outcry that is the bane of many an economist’s existence. Inflation does not “rob” people. It is not evil. Unpredictable high levels of inflation may sometimes be problematic, but the inflation rate in the US is very stable.
Your money is indeed worth less every year in the US as a result of inflation. But so is everyone else’s. Periods of unexpectedly high inflation hurt lenders, because it reduces the effective real interest rate (the total amount of debt is lower in real terms). Similarly, such periods help borrowers (like every American family, ever) because now their effective real debt burden is lower. When inflation is unexpectedly low, the reverse is true. To combat this, most loans are indexed to inflation. One final note: Inflation actually harms the wealthy most of all, because of the poor interaction between US capital gains tax laws with inflation (look at IRS capital gains tax law relating to inflation).
To conclude: Every single paragraph in the excerpts I read is exactly like this. Every sentence is simply not true, or contentious. If you want to choose a book to learn more about Monetary Policy, I would suggest getting an actual textbook. Romer or Mankiw are traditional favorites.
The problem with books like this is that the writers begin writing with an agenda. They start with an idea, and then set out to prove it. This leads to biased, inaccurate writing. What you will find in textbooks is simply an accounting of how economic policy works. Not politics, not an agenda.
If you have any questions about this, I would be happy to answer them.
Let me just tackle one quick aspect which is so fallaciously wrong I can't help to wonder what your background in Economics actually is. I would be pleased to be informed what your background is and what School you belong to. Seems to me, you are more than likely a Keynesianism--Neo-Classicist.
The highlighted is what I am responding to.
Let us start with what Inflation actually is.
“Inflation may be defined as any increase in the economy’s supply of money not consisting of an increase in the stock of the money metal.” – What has Government Done to Our Money? p. 43. Murray N. Rothbard
Or, as Mises wrote:
"In theoretical investigation there is only one meaning that can rationally be attached to the expression Inflation: an increase in the quantity of money (in the broader sense of the term, so as to include fiduciary media as well), that is not offset by a corresponding increase in the need for money (again in the broader sense of the term), so that a fall in the objective exchange-value of money must occur. Again, Deflation (or Restriction, or Contraction) signifies: a diminution of the quantity of money (in the broader sense) which is not offset by a corresponding diminution of the demand for money (in the broader sense), so that an increase in the objective exchange-value of money must occur."
Inflation, is inherently a tax, and inherently theft. It is the systematic redistribution of wealth from the middle class and poor to the affluent and politicial connected, more often than not, the latter in the highest of forms. Ask yourself, who obtains the newly pressed (or in today's case, zero added in a bank account) money first? Do you believe that prices are relative as soon as the new money is made? That prices reflect the first issuance of new money?
Let us tackle this in a more broader sense. Say, I am an owner of a private bank that issues its own fiat money. Say, there is 5,000 of my Rothbard Dollars in circulation. Prices are reflective of the general consensus of money supply (As no one can know the exact supply). Now, suddenly I decide that I'm going to double the money supply, and be the first one to obtain this new money. Hot off the press I have 5,000 Rothbard Dollars. The market has not yet felt the presence of this newly made money. So, I go and buy up assets and goods. I have just stolen from the people a huge amount of their purchasing power. Since I was the first one to have these new funds I bought up a majority of the assets, with the prices reflecting 5,000 in circulation. Now, once this money circulates through the Economy at large prices start to reflect the increase. Since the people holding say, 500 Rothbard Dollars now have to pay twice what they used to, I essentially stole from them half of their purchasing power. This made me richer, and the holders of the currency poorer.
Now, this is the same system (It is inherently inflationary, since money is created out of thin air), that is used everywhere in the world. What the Federal Reserve does (And it is indeed Private, since the Board of Governors, and other positions are solely private. The Head is of little consequence. Moreover, the holdings of the Federal Reserve are all private. You cannot buy stock, nor is the stock held by the Government), is essentially the exact same. Every new dollar is a loss of your purchasing power. They are stealing your wealth. Imagine holding 10,000$ now. Wouldn't you feel stolen from if say, GE or General Dynamics received these new funds first because they are connected to both the Welfare and Warfare State which receives this money first? Now, in a year or so, your 10,000$ are now worth half what it used to purchase. Instead of buying a car, now you can buy a TV. Or, instead of buying a fridge's worth of food, you now have half a fridge worth of food. If that is not theft, I don't know what is!
Moreover, the Inflation rate in the US may be stable, but is orderly theft, any better than disorderly theft? I think anyone with half a sense can tell we have annual inflation of over 8%+ a year. You could buy a car in 1970 for a few thousand (and this was a very nice car too). Now, for the same quality of product you pay 400-500% more! You can systematically go through every sector of the Economy and note these same increases. Now, if you take the median income in this country from 1970 to 2009, the increase has not been even close to matching the rate of inflation. We are all becoming much poorer. The politically connected are getting richer.
Your money is indeed worth less every year in the US as a result of inflation. But so is everyone else’s.
The person who receives this new money first, is enriching himself at the expense of everyone else. You are failing to see chains of causation. Quantitative Easing is nothing more than outright theft!
One final note: Inflation actually harms the wealthy most of all, because of the poor interaction between US capital gains tax laws with inflation (look at IRS capital gains tax law relating to inflation).
This is just the most absurd thing I've ever read. Yeah, I guess those people at GE, General Dynamics, Blackwater/XE, Haliburton, etc. are really hurting...Inflation hurts the poor most of all because wages do not raise in conjunction with inflation.
Not only that inflation is indicative of the resulting Boom-Bust that must happen. I have all ready gone over inflation and interest rates in a previous post on an earlier page. You may peruse for my answer here.
So we can see not only is inflation inherent theft by the first obtainers of the new money, it also seals the fate of the Boom-Bust cycle which brings about horrible misallocation of resources which destroys capital (Wealth) and massively reduces standard of living. So you get hit twice. People, do not listen to Keynesians. They still haven't come up with an answer to Stagflation. Why? Stagflation disproves their whole economic theory, yet they still persist!
To conclude: Every single paragraph in the excerpts I read is exactly like this. Every sentence is simply not true, or contentious. If you want to choose a book to learn more about Monetary Policy, I would suggest getting an actual textbook. Romer or Mankiw are traditional favorites.
You would do well to read these just as a scholarly exercise so you may more easily refute their theories and to understand their positions. However, anyone who is really interested in reading about Economics please pick up the works of:
Murray Rothbard Ludwig von Mises Carl Menger Gustave De Molinari Frederic Bastiat Jean Anne-Robert Turgot Jean-Baptiste Say Henry D. MacLeod Karl Heinrich Rau Jerome-Adolphe Blanqui
On January 29 2010 05:58 Undisputed- wrote: I'm too lazy to read the whole thread as there are numerous walls of text. In the OP i don't see many solutions given for the supposed problems. In the US we don't even have a pure capitalist free market economy.
In the US we do not have Capitalism. In the US we have Fascism with a mix of Socialism.
Yeah I guess it's difficult to classify what we really are its a mix. That's what I mean though we aren't a capitalist country. Where is this outrage coming from, if anything we could use more capitalist principles.
On January 28 2010 06:48 Boblion wrote: Btw StorkHwaiting i don't understand how people can disagree with you as you are stating the obvious. Globalization raping the lower middle class in Western countries is common knowledge but it is funny to see all those guys with an eco degree in the thread raging because you are discussing an Economic issue lol. Economy is as scientific as Sociology, History or Political science. I mean all those guys with Phd, Nobel prizes etc ... they weren't able to predict the crisis. I don't want to be mean but there many people ( Stiglitz, Greenspan etc ... ) who are way more qualified than anyone in this thread and guess what they were completly wrong. So my advice for guys like Caller is to get off of their high horse because having an eco degree is like being C on Iccup and thinking that you are the shit whereas you are just a stupid copycat who has learnt a couple of build orders / eco models. Be humble.
Perhaps you are not familiar with the Austrian School of Economics, which is Economics. The Austrian school is the only scientific Economic School of Thought. This is why, Rothbard called Economics the "dismal science". :p
Go on Youtube and type in: Peter Schiff was Right
Now, you can go to Texas Straight Talk, or Ron Paul Library and check out speeches of Ron Paul from 1997 and 2003 excoriating the coming busts in both .com and housing respectively. Not only that, Lv Mises excoriated the World in 1927 about the coming economic calamity. The Austrians are the only ones who consistently predict every Boom-Bust because we are the only ones to have a theory to explain it. Moreover, we are the only Free-Market school of thought left. Perhaps more people need to go back and read Cantillon, Say, Turgot, Bastiat, Molinari, School of Salamanca, and other liberal Laissez-Faire theorists. Moreover, Jim Rogers and Marc Faber predicted the same mess.
What do all of these people have in common? They are all Austrians.
I liken Monetarists/Keynesians/Neo-Classicists as dabbling in Astrology while us Austrians do the Astronomy work. Of course, looking through the glass of Astrology you wouldn't call it a science, but through the lens of Astronomy, you would.
Come on, Keynes is the fool who said that saving doesn't matter because in the long run we are all dead. He also blamed ups and downs in the market on "animal spirits".
Oh so the Austrians have predicted the last crisis ? I think i have missed something o,o Eh i guess that if i was talking with a Keynesian or a Monetarist he would tell me the same thing. As a wise man said "an economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today". When it comes down to Human Sciences i don't think that we are advanced enough to find the truth ( if a truth exists lol ) and even predictions are often inaccurate or false. I think we will have to stick with caricatured models for a long long time. It won't prevent smart kids to think they are right though :o
You have never heard of the Austrians, but then in the same breadth say we don't know whats going on and then lump us in the whole of Economic thought, when our theories are the opposite of everyone else? It doesn't add up.
Seriously, I really recommend going to YT and typing in Peter Schiff Was Right. Or going on www.mises.org and perusing Free Market and Journal of Libertarian Studies in the preceeding Boom years. Also go to Texas Straight Talk or Ron Paul Library and read his speeches before the busts. Or follow Jim Rogers or Marc Faber who are Austrians and have predicted the booms-busts. Or check out the history of the School of Thought. It is not widely known in the Orthodoxy, but it was Mises who said in 1927 that he did not want his name associated with Austria's most prestigious bank because of the impeding calamity that was coming. As we all know the Great Depression hit two years later.
As for no truths in Economics, that is false. There are truths. We call this Praxeology or A priorism. Our facts are arrived through logic. It is a truth, that Human's Act, for instance. I think if you are truly interested a reading of Human Action by Ludwig von Mises may be a great tool to help you understand our current world a bit better (And the Science of Economics).
You can read it for free on www.mises.org. Living out our philosophy :p (Anti-IP).
I also am not trying to chide or deride you, merely trying to point you in the right direction. Hopefully this helps and if you have any further inquiries please do ask!
On January 28 2010 06:48 Boblion wrote: Btw StorkHwaiting i don't understand how people can disagree with you as you are stating the obvious. Globalization raping the lower middle class in Western countries is common knowledge but it is funny to see all those guys with an eco degree in the thread raging because you are discussing an Economic issue lol. Economy is as scientific as Sociology, History or Political science. I mean all those guys with Phd, Nobel prizes etc ... they weren't able to predict the crisis. I don't want to be mean but there many people ( Stiglitz, Greenspan etc ... ) who are way more qualified than anyone in this thread and guess what they were completly wrong. So my advice for guys like Caller is to get off of their high horse because having an eco degree is like being C on Iccup and thinking that you are the shit whereas you are just a stupid copycat who has learnt a couple of build orders / eco models. Be humble.
Perhaps you are not familiar with the Austrian School of Economics, which is Economics. The Austrian school is the only scientific Economic School of Thought. This is why, Rothbard called Economics the "dismal science". :p
Go on Youtube and type in: Peter Schiff was Right
Now, you can go to Texas Straight Talk, or Ron Paul Library and check out speeches of Ron Paul from 1997 and 2003 excoriating the coming busts in both .com and housing respectively. Not only that, Lv Mises excoriated the World in 1927 about the coming economic calamity. The Austrians are the only ones who consistently predict every Boom-Bust because we are the only ones to have a theory to explain it. Moreover, we are the only Free-Market school of thought left. Perhaps more people need to go back and read Cantillon, Say, Turgot, Bastiat, Molinari, School of Salamanca, and other liberal Laissez-Faire theorists. Moreover, Jim Rogers and Marc Faber predicted the same mess.
What do all of these people have in common? They are all Austrians.
I liken Monetarists/Keynesians/Neo-Classicists as dabbling in Astrology while us Austrians do the Astronomy work. Of course, looking through the glass of Astrology you wouldn't call it a science, but through the lens of Astronomy, you would.
Come on, Keynes is the fool who said that saving doesn't matter because in the long run we are all dead. He also blamed ups and downs in the market on "animal spirits".
Oh so the Austrians have predicted the last crisis ? I think i have missed something o,o Eh i guess that if i was talking with a Keynesian or a Monetarist he would tell me the same thing. As a wise man said "an economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today". When it comes down to Human Sciences i don't think that we are advanced enough to find the truth ( if a truth exists lol ) and even predictions are often inaccurate or false. I think we will have to stick with caricatured models for a long long time. It won't prevent smart kids to think they are right though :o
You have never heard of the Austrians, but then in the same breadth say we don't know whats going on and then lump us in the whole of Economic thought, when our theories are the opposite of everyone else? It doesn't add up.
Well i think it is probably because of the language barrier and different cultures but people don't get it when i'm being ironic ;D
On January 28 2010 06:48 Boblion wrote: Btw StorkHwaiting i don't understand how people can disagree with you as you are stating the obvious. Globalization raping the lower middle class in Western countries is common knowledge but it is funny to see all those guys with an eco degree in the thread raging because you are discussing an Economic issue lol. Economy is as scientific as Sociology, History or Political science. I mean all those guys with Phd, Nobel prizes etc ... they weren't able to predict the crisis. I don't want to be mean but there many people ( Stiglitz, Greenspan etc ... ) who are way more qualified than anyone in this thread and guess what they were completly wrong. So my advice for guys like Caller is to get off of their high horse because having an eco degree is like being C on Iccup and thinking that you are the shit whereas you are just a stupid copycat who has learnt a couple of build orders / eco models. Be humble.
Perhaps you are not familiar with the Austrian School of Economics, which is Economics. The Austrian school is the only scientific Economic School of Thought. This is why, Rothbard called Economics the "dismal science". :p
Go on Youtube and type in: Peter Schiff was Right
Now, you can go to Texas Straight Talk, or Ron Paul Library and check out speeches of Ron Paul from 1997 and 2003 excoriating the coming busts in both .com and housing respectively. Not only that, Lv Mises excoriated the World in 1927 about the coming economic calamity. The Austrians are the only ones who consistently predict every Boom-Bust because we are the only ones to have a theory to explain it. Moreover, we are the only Free-Market school of thought left. Perhaps more people need to go back and read Cantillon, Say, Turgot, Bastiat, Molinari, School of Salamanca, and other liberal Laissez-Faire theorists. Moreover, Jim Rogers and Marc Faber predicted the same mess.
What do all of these people have in common? They are all Austrians.
I liken Monetarists/Keynesians/Neo-Classicists as dabbling in Astrology while us Austrians do the Astronomy work. Of course, looking through the glass of Astrology you wouldn't call it a science, but through the lens of Astronomy, you would.
Come on, Keynes is the fool who said that saving doesn't matter because in the long run we are all dead. He also blamed ups and downs in the market on "animal spirits".
Oh so the Austrians have predicted the last crisis ? I think i have missed something o,o Eh i guess that if i was talking with a Keynesian or a Monetarist he would tell me the same thing. As a wise man said "an economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today". When it comes down to Human Sciences i don't think that we are advanced enough to find the truth ( if a truth exists lol ) and even predictions are often inaccurate or false. I think we will have to stick with caricatured models for a long long time. It won't prevent smart kids to think they are right though :o
You have never heard of the Austrians, but then in the same breadth say we don't know whats going on and then lump us in the whole of Economic thought, when our theories are the opposite of everyone else? It doesn't add up.
Well i think it is probably because of the language barrier and different cultures but people don't get it when i'm being ironic ;D
Oh, ok understood. I would really like for you to take a look at that Peter Schiff video though. It just goes to show you how wrong the Orthodoxy is.
Globalism and Capitalism with no regulations will give you price fixing, sweatshops, child labor, environmental damage (causing cancer on a massive scale (lookup asbestos, or the lawsuit against Exxon Mobil by indigenous people in Ecuador) or coal sludge or nuclear waste), prostitution, human trafficking, dumping, organ trade (lookup organ trade and India), war (the most profitable business known to mankind), terrorism (in response to exploitation), disease (massive amounts of movement of people and food products will always give you more disease) and the rise of robber barons who will siphon money into corporate tax havens like mailboxes in the Caymans or Swiss bank accounts to evade taxes. The only tool the little man has to stop theft on such a large scale is a strong regulatory authority in the form of a government regulatory body that is accountable to it's people. Sadly, corporations the world over have bought large parts of the governments everywhere and we are all screwed.
On January 29 2010 05:58 Undisputed- wrote: I'm too lazy to read the whole thread as there are numerous walls of text. In the OP i don't see many solutions given for the supposed problems. In the US we don't even have a pure capitalist free market economy.
In the US we do not have Capitalism. In the US we have Fascism with a mix of Socialism.
You are wasting your energy, it's not like anyone will take his time to reason over Austrian arguments. The ratio of clueless wannabee experts to people who actually at least try to give some thought to what they say is quite disturbing. For some reason I had the impression there are more Austrians on TL, which made me pleasantly surprised at the time, but this thread got my feet back on the ground. This reminds me, what happened to the Freestate project? It started up as an interesting idea but totally lost its momentum. Since it's only for US citizen I never really followed it, but now it seems to be pretty dead. What a shame ^^
Let us take this from the Austrian approach, or the only Free-Market School of Economic ... Since Monetary Policy is the bedrock of any Economic Foundation one must first look here.
A few things to start: First, while the Austrian approach has contributed significantly to economic thought, particularly in the first 30 years of the twentieth century, it is no longer viewed by economists as being significant. The major problem with the Austrian approach is its belief that it is a fallacy to apply mathematical models to Economics. They believe economic interactions are too complex to model statistically. As someone who has run a great deal of economic regressions, and used those responses to predict or prove things accurately, I can firmly say such beliefs are downright absurd. Most economists criticize the Austrian approach as relying to heavily on verbal arguments, and failing to recognize its own weak points.
Perhaps one reason you don’t believe you can have a Free-Market system without a “Sound-Commodity” currency is because you are looking at the US. The US doesn’t even make the Heritage Foundations’ top ten list of freest economies. Hong Kong is the freest economy in the world, and does not have such a currency.
For several unanswered criticisms of the Austrian approach, see: Krugman’s “the Hangover Theory” and Friedman’s “Monetary Studies of the National Bureau” and “The Plucking Model of Business Fluctuations Revisted”.
So, with this we come to Central Banking and the Federal Reserve. What is the purpose of the Federal Reserve? ... Obviously when you wake up the next morning you aren't going to feel too well.
US monetary policy today is nothing like the policies of the 20’s, 30’s, and 40’s. Economics is a relatively new field, and has only recently (in the last 20-50 years) really began to make significant progress towards understanding human economic behavior. Also, your history needs a little work. The Great Depression effected the entire world, not just the US. Economists still debate the cause of the Depression. One argument is indeed that it was triggered by poor use of monetary and fiscal policy. But again, such thinking does not reflect modern economic theory. (In fact, and I find this a little humorous, it seems likely that, given how influential the Austrian approach was at the time, that it was the Austrian approach that led to the Depression). Since the Depression, the US has experienced high levels of long-term, steady growth. See: Historical National and per capita GDP.
I'm not sure if you are aware of the Austrian Theory of the Business Cycle, but interest rates are used to coordinate resources. Low interest rates are supposed to represent an increased savings freeing up capital to be used in the lower orders of production (Those areas which are far away from the consumer -- Mining, Steel Production, etc.), which are long-term investments. Higher interest rates are supposed to represent less savings and a consumer demand for higher order of production goods (Those which are closest to the consumer -- End products in Wal-Mart, Target, Gamestop, on the Car-lots, etc.)
.
Interest rates are used to coordinate resources. But as for your discussion that follows? Low interest rates represent increased borrowing, or investment in physical capital, as the real cost of borrowing money has gone down (a company will build a new plant, because its cheaper, as you later state). I don’t know how this would free up capital though. It will create new physical capital though. It has nothing to do with “how far it is from the consumer”. How do you arrive at that? All business will respond to the lower interest rates, not just mining and steel companies. Wal-Mart will build more stores because interest rates are lower, car lots will buy more cars. Higher interest rates represent MORE saving, not less. If your bank was offering 10% annual return on your money, would you save more? Of course you would. Similarly, if the interest rate is higher, you are much less likely to borrow money. The market coordinates this allocation of capital via Interest rates as we have seen. What happens with the Federal Reserve and any Central Bank however, is that they artificially lower or raise interest rates. Justification for these lowering and raising of rates in most cases has to deal with the political ramifications.
The Federal Reserve is independent of politicians. More often than not, politicians are upset at the Federal reserve because it will not pursue the types of policies they want.
There is honestly no central authority capable of knowing the homogenous interest rate of an entire Naton, ... This is the bust that must always come. As you can see, at the very onset we do not have a Free-Market Economy, nor do the Orthodoxy in any single Nation in the world even bring this up.
You write a lot of things here, and draw many conclusions. However, I don’t see a logical foundation or support for any of them. Statements like “can only be achieved by” are not supported in any way. And what scarce resources are you referring to? Money available for loans? I don't mean this as an attack, and I would appreciate it if you would re-write this so I could answer it more easily.
Also, there are many branches of the Federal Reserve, spread out across the country.
Finally, (again I apologize if you see this as a personal attack) you seem to be confused about the nature of a “sound-commodity currency”. I assume you mean a currency that is backed by a commodity, such that the currency has intrinsic value? Gold and silver have often been used as such commodities. However, you say such a currency cannot be inflated “at the politicians whim”. Ignoring my earlier comment about the independence of the Fed, I will instead say: Yes, it can.
When a currency is back by a commodity, the amount of money in circulation is limited by the amount of that commodity in reserve. If the government wants to increase the money supply, they simply store more gold. (its ability to do so will, of course, be limited by gold production) If it wants to contract the money supply, it sells gold. The reason such currencies don’t work is that you are essentially maintaining a fixed exchange rate with every other country that is on that standard. In addition, there simply isn’t enough of any commodity to go around. The total value of all gold EVER mined is close to $4.5 trillion. There is currently about $8.3 trillion in circulation.
Let's now look at the ramifications for the busts. The longer the booms last, the larger the misallocation of scarce resources. (...) The entreprenuer will not always be right, however, these hiccups will be local and fleeting at the worse
.
There are too many problems with this analysis to list them all. A few: You don’t have to print money to keep interest rates at 1%. Look at Japan. You don’t offer any evidence as to how sound-currency would prevent a boom-bust cycle. (The Austrian school has particular problems explaining the business cycle, read the articles I listed). Bubbles don’t arise from being “forced to speculate to recoup your loss of purchasing power”. That doesn’t make any sense at all. Bubbles occur because people historically invest at the wrong time. People see a commodity or stock rising, and invest in it, causing it to rise further than growth which caused the original rise to occur. This further growth and investment cycle continues ad nauseam until investors begin to get worried. When investors get worried, they pull their money. This is the point where the bubble breaks, as people try and retrieve their money as quickly as possible before their investment loses its value. If everyone had kept their money in, however, the bubble would not have broken. There is absolutely nothing about purchasing power, allocation of scarce resources, or any of your other statements involved in the process of bubbles.
Not only that, the most insidioux tax is the Inflation Tax. Since prices do not immediately respond to the first infusion of new money, those at the very forefront of receiving this newly printed (or in today's case, newly added zero on a computer), have increased purchasing power without producing one single good or service. It is fraud. It is debasement. It is theft. You become poorer. When that money finally trickles down to you, prices of goods and services will have exploded. Your purchasing power will have been eroded. This is the silent transfer of wealth from the middle class, poor, and upper class to the affluent and to those who have political connections. This is why those who call for inflationary policies are themselves demanding to be robbed!
See my earlier post. This is an extraordinarily common populist complaint, and has no merit what-so-ever. As noted earlier, inflation harms the wealthy more than other groups because of the interaction between inflation and capital gains taxes. There is no one “at the very forefront” of receiving this new money.
I read your last post before posting this, this is a response to what you wrote in that: First, the annual inflation rate in the US has averaged about 3%. Second, newly printed money and money put into the system from buying bonds is not localized. The person who sells the bond is receiving the money. Newly printed money is distributed to pay for any of the millions of things the government spends money on. Furthermore, inflation is not a “Oh no, they just doubled the money supply today” thing in the US. An annual rate of three percent is about a quarter of one percent per month.
The situations you describe where people are actually hurt by inflation are those of hyperinflation, where inflation can reach 300 or 3,000,000 percent per year.
Finally, you are forgetting that inflation, in the US, is not unexpected. People have already discounted the $10,000 by the expected inflation rate in your example.
. Taxation -- All taxation is inherently and necessarily theft. It is the violent appropriation of income from one individual to another at the expense of the first individual. From a wholly moral position, we must be against theft -- taxation. Taxation in every case is a distorting factor in the market.
I agree. But taxation is the only method of funding the government sufficiently. And, because people will free-load as often as they can, a funded government is necessary for the creation of public goods such as roads and parks.
"There has been a great deal of controversy among economists on how to approach the analysis of taxation. Old-fashioned Marshallians insist on the “partial equilibrium” approach of looking only at a particular type of tax, in isolation, and then analyzing its effects; Walrasians, more fashionable today (and exemplified by the late Italian public finance expert, Antonio De Viti De Marco), insist that taxes cannot be considered at all in isolation, that they may be analyzed only in conjunction with what the government does with the proceeds. In all this, what would be the “Austrian” approach, had it been developed, is being neglected. This holds that both procedures are legitimate and necessary to analyze the taxing process fully. In short: the level of taxes-and-expenditures may be analyzed and its inevitable redistributive and distortive effects discussed; and, within this aggregate of taxes, individual types of taxes may then be analyzed in isolation. Neither the partial nor the general approaches should be overlooked."
Economists do this. Austrian economists do not. Why? Because economists use mathematical modeling techniques known as multi-variable regressions. Austrian economists eschew mathematical approaches.
Now, with that said, not only do we have to look at Taxation as the actually specific tax on an individual, or business, but in the aggregate terms, we must also have to look at Government Spending. (...) it bears the immediate brunt of payment. However, even without yet considering the “partial equilibrium” problem of how or whether such taxes are “shifted” by the betel-nut industry onto other shoulders, we should also note that it is not the only one to pay; the consumers of paper certainly pay by finding paper prices raised to them."
This is mostly true. I will only note that calculating who bears any particular tax burden is quite difficult, as every person and every industry has every incentive to push the tax burden onto other people.
Now, let's answer your question about taxing capital. I have found the only people who advocate a tax on capital are the people who do not understand what capital is, and what is accomplishes.
So, so true.
Capital is savings. Not only do you advocate a tax on the very first turn (Actually receiving your wages), now you also want to tax savings (investment) with those all ready taxed wages. Eventually, this freed up time, allows for them to produce nets for everyone, which increases everyones productivity, and ad infinitum)! Capital accruement and investment is the sole reason for our increases in standard of living. To want to tax that, is ludicrous!
Again, this is mostly true. Most international economists are against the direct taxation of capital. Income tax is, as you say, an indirect tax on capital formation. But it is also necessary if you want to have a funded government.
. As you can see the Orthodoxy in America and indeed the world, is not one of Free-Markets, but one of Centrally-Planned Socialist/Fascist Economies. Our world today is not a failure of Free-Markets, but of a failure of Statism. Not only that, regulation has increased tri-fold in the last 10 years. Look at the IRS, EPA, FDA, State regulatory agencies, SEC (Yes, they had more regulations in 2004 than they had in 1992 for example), FDIC, etc.
I’m all for less regulation. But making the claim that America is a centrally planned economy? That’s plain silly.
3. Again I refer to #2. Rhetoric means nothing. Action, consequences, policies, etc. mean everything. We do not have a Free-Market Economy, not even close!!! Globalization is also a part of the Centrally-Planned Economy. Look at NAFTA, GATT, CAFTA, WTO, etc. This is not Free-Trade. This is Neo-Mercantilism regulated, managed, etc. trade. Free-Trade requires a one page agreement between Nation-States, not 2,000+ pages of regulations. Moreover, if we have been pushing for more Globalization how come the US still has an inordinate amount of embargoes, sanctions, and other hostile trade policies to many many countries?
If you examine international trade theorists (which I forgot you mostly did in the next paragraph), you would see that many economists are frustrated with the lack of progress towards free trade that is being made. There are two camps: One argues that these incremental steps are helpful, and will eventually result in true freedom of trade. The second argues such steps are detrimental, as true free-trade will be replaced entirely with these kinds of agreements (NAFTA).
I'm sorry I am out of time for right now. I will continue on the rest of your points when I get a chance.
In short, I agree with the idea of trying to move towards a free market economy, and I agree that it doesn’t seem like there is much progress. However, I think your belief that this results from our currency system is entirely wrong.
Thanks for reading! If you have any rebuttals or questions I would be happy to read and answer them!
A few quotes that I find highly relevant and quite obviously agree with:
"Laissez faire capitalism is the only social system based on the recognition of individual rights and, therefore, the only system that bans force from social relationshps. By the nature of its basic principles and interests, it is the only system fundamentally opposed to war." - Ayn Rand
"As every individual, therefore, endeavors as much he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labors to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was not part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it." Adam Smith
On January 29 2010 05:58 Undisputed- wrote: I'm too lazy to read the whole thread as there are numerous walls of text. In the OP i don't see many solutions given for the supposed problems. In the US we don't even have a pure capitalist free market economy.
In the US we do not have Capitalism. In the US we have Fascism with a mix of Socialism.
You are wasting your energy, it's not like anyone will take his time to reason over Austrian arguments. The ratio of clueless wannabee experts to people who actually at least try to give some thought to what they say is quite disturbing. For some reason I had the impression there are more Austrians on TL, which made me pleasantly surprised at the time, but this thread got my feet back on the ground. This reminds me, what happened to the Freestate project? It started up as an interesting idea but totally lost its momentum. Since it's only for US citizen I never really followed it, but now it seems to be pretty dead. What a shame ^^
Hello bUbUshed (lol),
The Free State Project is still going strong. We are up to 10,000 that have signed on, and reports estimate anywhere from 800 to 1300+ early movers. They have all ready made a lot of strides, and the Keeniacs are doing what they do best! www.freekeene.com
NH now has about 70 to 80 libertarian Republicans in their legislature, and are poised to re-take the legislature back this election cycle. Forsythe is working hard, as are many on the ground. NH also has the most liberty media anywhere in the world, and has the most liberty activists anywhere in the world. It is indeed a slow process though, but the task of moving is daunting. I suspect when the Economy gets a lot worse (and it will, and it will be a currency crisis coming), that more people will move because they really don't have much to lose, but a lot to gain.
I'm also glad I'm not alone here. Even though everyone may not read my thesis' hopefully a few will and a few will do more independant research on their own.
We (Market-Anarchists and Minarchist Misesians) are very much into Civil Disobedience, so come on over to NH anyways! The State has no right to tell what someone can or cannot do on their own private property. Immigration law dictated by the State is inherently unjust and immoral, so we have no problem doing a little CD and Agorism. :p
You'd be better served by just explaining that the burden of inflation hurts rich people more than poor due to the aggregate losses, rather than trying to explain capital gains. -10% of a billion dollars is a lot more than -10% of $100 dollars. (...) Whereas, rich people have a great deal of their income that can be constantly invested to grow more money
This is correct. Any tax is going to “hurt” the poor more than the rich because the poor have less money. All I am saying here is that capital gains taxes fall disproportionately on the wealthy, because they represent the majority of investors.
Therefore, not only are rich people more insulated against the losses caused by inflation, but they have greater means to counteract and neutralize the effects of inflation. So, really, your answer lacks a ton of nuance. While the populist theories are alarmist and not quite right, they do capture the essence of what actually occurs with inflation. The poor people's money is siphoned off and they have no way to recoup it. The rich people's money is siphoned off as well, but they have far greater options to combat inflation. They can invest. All most poor people can do to combat inflation is take on another job.
You say “therefore” but are switching the topic from capital gains to inflation. I see why you have done so, but inflation and capital gains taxes are two separate beasts. Investing does not counteract the effects of inflation, as it reduces the real rate of return. I think your best line of attack might be to argue that the wages paid by jobs of the poor are less likely to keep pace with inflation than wages paid by the jobs of the rich.
Also, you are flat out wrong that every American family ever is a borrower. Credit card debt is a relatively new phenomenon. At the same time, there is absolutely no guarantee that wages will rise with inflation. That is only a hoped for outcome.
“Every” is, of course, an exaggeration. But I would venture to say that, since the 20th century, nearly every single American family has, at some time, borrowed money for a car, a house, or school loans. I was not referring to credit card debt (Aside: 22% interest on my credit card! Why??). I wasn’t claiming that everyone’s debt burden would be lowered, as (I thought I stated this) many loans are indexed to inflation. I was pointing out the winners and losers from un-indexed loans when unexpected changes in inflation occur.
On January 29 2010 05:58 Undisputed- wrote: I'm too lazy to read the whole thread as there are numerous walls of text. In the OP i don't see many solutions given for the supposed problems. In the US we don't even have a pure capitalist free market economy.
In the US we do not have Capitalism. In the US we have Fascism with a mix of Socialism.
You are wasting your energy, it's not like anyone will take his time to reason over Austrian arguments. The ratio of clueless wannabee experts to people who actually at least try to give some thought to what they say is quite disturbing. For some reason I had the impression there are more Austrians on TL, which made me pleasantly surprised at the time, but this thread got my feet back on the ground. This reminds me, what happened to the Freestate project? It started up as an interesting idea but totally lost its momentum. Since it's only for US citizen I never really followed it, but now it seems to be pretty dead. What a shame ^^
Hello bUbUshed (lol),
The Free State Project is still going strong. We are up to 10,000 that have signed on, and reports estimate anywhere from 800 to 1300+ early movers. They have all ready made a lot of strides, and the Keeniacs are doing what they do best! www.freekeene.com
NH now has about 70 to 80 libertarian Republicans in their legislature, and are poised to re-take the legislature back this election cycle. Forsythe is working hard, as are many on the ground. NH also has the most liberty media anywhere in the world, and has the most liberty activists anywhere in the world. It is indeed a slow process though, but the task of moving is daunting. I suspect when the Economy gets a lot worse (and it will, and it will be a currency crisis coming), that more people will move because they really don't have much to lose, but a lot to gain.
I'm also glad I'm not alone here. Even though everyone may not read my thesis' hopefully a few will and a few will do more independant research on their own.
We (Market-Anarchists and Minarchist Misesians) are very much into Civil Disobedience, so come on over to NH anyways! The State has no right to tell what someone can or cannot do on their own private property. Immigration law dictated by the State is inherently unjust and immoral, so we have no problem doing a little CD and Agorism. :p
That sounds like you are already in NH, pretty cool . It's really great to hear that FSP is still alive. I already moved from Europe to China and it's not like I'd ever go back, but NH would be a nice backup plan for the next crisis (if going to Bali for a long vacation fails :p)
Ohhh, an Austrian that posts walls of texts. I've always loved Hayek for exposing the hubris of central planning. Although it's not constructive useful. It's only good for trying to tear down the bad ideas of central planners. Seems like a losing battle that must be fought.
I tend to stick with micro-economics when I do dabble.
Ceteris Paribus. Obviously the real world operates differently from the economic theories which operate in a vacuum. It is up to each country to adjust their economic models depending on the numerous factors they face (such as cultural issues, political situation, technological development, international relations, etc) to guide their development. Just because the US fucked up its economic development doesn't mean that other countries will inevitably fuck up theirs. Policies are going to be adjusted to make sure what happened in the US doesn't happen again in other countries. The world is ever-changing but economic theories stay the same.
I disagree that globalization and free market proponents are wrong (it's way better than communism if you ask me), but I do believe that it should be regulated by forces (government, moral, etc) to prevent the rich from exploiting the lower classes and getting too much money out of it.
On January 29 2010 09:54 meegrean wrote: Ceteris Paribus. Obviously the real world operates differently from the economic theories which operate in a vacuum. It is up to each country to adjust their economic models depending on the numerous factors they face (such as cultural issues, political situation, technological development, international relations, etc) to guide their development. Just because the US fucked up its economic development doesn't mean that other countries will inevitably fuck up theirs. Policies are going to be adjusted to make sure what happened in the US doesn't happen again in other countries. The world is ever-changing but economic theories stay the same.
I disagree that globalization and free market proponents are wrong (it's way better than communism if you ask me), but I do believe that it should be regulated by forces (government, moral, etc) to prevent the rich from exploiting the lower classes and getting too much money out of it.
Meegrean, basically you've said you agree with my original position, which is that capitalism and the market need to be regulated. Nobody ever advocated communism.
Let us take this from the Austrian approach, or the only Free-Market School of Economic ... Since Monetary Policy is the bedrock of any Economic Foundation one must first look here.
A few things to start: First, while the Austrian approach has contributed significantly to economic thought, particularly in the first 30 years of the twentieth century, it is no longer viewed by economists as being significant. The major problem with the Austrian approach is its belief that it is a fallacy to apply mathematical models to Economics. They believe economic interactions are too complex to model statistically. As someone who has run a great deal of economic regressions, and used those responses to predict or prove things accurately, I can firmly say such beliefs are downright absurd. Most economists criticize the Austrian approach as relying to heavily on verbal arguments, and failing to recognize its own weak points.
Perhaps one reason you don’t believe you can have a Free-Market system without a “Sound-Commodity” currency is because you are looking at the US. The US doesn’t even make the Heritage Foundations’ top ten list of freest economies. Hong Kong is the freest economy in the world, and does not have such a currency.
For several unanswered criticisms of the Austrian approach, see: Krugman’s “the Hangover Theory” and Friedman’s “Monetary Studies of the National Bureau” and “The Plucking Model of Business Fluctuations Revisted”.
So, with this we come to Central Banking and the Federal Reserve. What is the purpose of the Federal Reserve? ... Obviously when you wake up the next morning you aren't going to feel too well.
US monetary policy today is nothing like the policies of the 20’s, 30’s, and 40’s. Economics is a relatively new field, and has only recently (in the last 20-50 years) really began to make significant progress towards understanding human economic behavior. Also, your history needs a little work. The Great Depression effected the entire world, not just the US. Economists still debate the cause of the Depression. One argument is indeed that it was triggered by poor use of monetary and fiscal policy. But again, such thinking does not reflect modern economic theory. (In fact, and I find this a little humorous, it seems likely that, given how influential the Austrian approach was at the time, that it was the Austrian approach that led to the Depression). Since the Depression, the US has experienced high levels of long-term, steady growth. See: Historical National and per capita GDP.
I'm not sure if you are aware of the Austrian Theory of the Business Cycle, but interest rates are used to coordinate resources. Low interest rates are supposed to represent an increased savings freeing up capital to be used in the lower orders of production (Those areas which are far away from the consumer -- Mining, Steel Production, etc.), which are long-term investments. Higher interest rates are supposed to represent less savings and a consumer demand for higher order of production goods (Those which are closest to the consumer -- End products in Wal-Mart, Target, Gamestop, on the Car-lots, etc.)
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Interest rates are used to coordinate resources. But as for your discussion that follows? Low interest rates represent increased borrowing, or investment in physical capital, as the real cost of borrowing money has gone down (a company will build a new plant, because its cheaper, as you later state). I don’t know how this would free up capital though. It will create new physical capital though. It has nothing to do with “how far it is from the consumer”. How do you arrive at that? All business will respond to the lower interest rates, not just mining and steel companies. Wal-Mart will build more stores because interest rates are lower, car lots will buy more cars. Higher interest rates represent MORE saving, not less. If your bank was offering 10% annual return on your money, would you save more? Of course you would. Similarly, if the interest rate is higher, you are much less likely to borrow money. The market coordinates this allocation of capital via Interest rates as we have seen. What happens with the Federal Reserve and any Central Bank however, is that they artificially lower or raise interest rates. Justification for these lowering and raising of rates in most cases has to deal with the political ramifications.
The Federal Reserve is independent of politicians. More often than not, politicians are upset at the Federal reserve because it will not pursue the types of policies they want.
There is honestly no central authority capable of knowing the homogenous interest rate of an entire Naton, ... This is the bust that must always come. As you can see, at the very onset we do not have a Free-Market Economy, nor do the Orthodoxy in any single Nation in the world even bring this up.
You write a lot of things here, and draw many conclusions. However, I don’t see a logical foundation or support for any of them. Statements like “can only be achieved by” are not supported in any way. And what scarce resources are you referring to? Money available for loans? I don't mean this as an attack, and I would appreciate it if you would re-write this so I could answer it more easily.
Also, there are many branches of the Federal Reserve, spread out across the country.
Finally, (again I apologize if you see this as a personal attack) you seem to be confused about the nature of a “sound-commodity currency”. I assume you mean a currency that is backed by a commodity, such that the currency has intrinsic value? Gold and silver have often been used as such commodities. However, you say such a currency cannot be inflated “at the politicians whim”. Ignoring my earlier comment about the independence of the Fed, I will instead say: Yes, it can.
When a currency is back by a commodity, the amount of money in circulation is limited by the amount of that commodity in reserve. If the government wants to increase the money supply, they simply store more gold. (its ability to do so will, of course, be limited by gold production) If it wants to contract the money supply, it sells gold. The reason such currencies don’t work is that you are essentially maintaining a fixed exchange rate with every other country that is on that standard. In addition, there simply isn’t enough of any commodity to go around. The total value of all gold EVER mined is close to $4.5 trillion. There is currently about $8.3 trillion in circulation.
Let's now look at the ramifications for the busts. The longer the booms last, the larger the misallocation of scarce resources. (...) The entreprenuer will not always be right, however, these hiccups will be local and fleeting at the worse
.
There are too many problems with this analysis to list them all. A few: You don’t have to print money to keep interest rates at 1%. Look at Japan. You don’t offer any evidence as to how sound-currency would prevent a boom-bust cycle. (The Austrian school has particular problems explaining the business cycle, read the articles I listed). Bubbles don’t arise from being “forced to speculate to recoup your loss of purchasing power”. That doesn’t make any sense at all. Bubbles occur because people historically invest at the wrong time. People see a commodity or stock rising, and invest in it, causing it to rise further than growth which caused the original rise to occur. This further growth and investment cycle continues ad nauseam until investors begin to get worried. When investors get worried, they pull their money. This is the point where the bubble breaks, as people try and retrieve their money as quickly as possible before their investment loses its value. If everyone had kept their money in, however, the bubble would not have broken. There is absolutely nothing about purchasing power, allocation of scarce resources, or any of your other statements involved in the process of bubbles.
Not only that, the most insidioux tax is the Inflation Tax. Since prices do not immediately respond to the first infusion of new money, those at the very forefront of receiving this newly printed (or in today's case, newly added zero on a computer), have increased purchasing power without producing one single good or service. It is fraud. It is debasement. It is theft. You become poorer. When that money finally trickles down to you, prices of goods and services will have exploded. Your purchasing power will have been eroded. This is the silent transfer of wealth from the middle class, poor, and upper class to the affluent and to those who have political connections. This is why those who call for inflationary policies are themselves demanding to be robbed!
See my earlier post. This is an extraordinarily common populist complaint, and has no merit what-so-ever. As noted earlier, inflation harms the wealthy more than other groups because of the interaction between inflation and capital gains taxes. There is no one “at the very forefront” of receiving this new money.
I read your last post before posting this, this is a response to what you wrote in that: First, the annual inflation rate in the US has averaged about 3%. Second, newly printed money and money put into the system from buying bonds is not localized. The person who sells the bond is receiving the money. Newly printed money is distributed to pay for any of the millions of things the government spends money on. Furthermore, inflation is not a “Oh no, they just doubled the money supply today” thing in the US. An annual rate of three percent is about a quarter of one percent per month.
The situations you describe where people are actually hurt by inflation are those of hyperinflation, where inflation can reach 300 or 3,000,000 percent per year.
Finally, you are forgetting that inflation, in the US, is not unexpected. People have already discounted the $10,000 by the expected inflation rate in your example.
. Taxation -- All taxation is inherently and necessarily theft. It is the violent appropriation of income from one individual to another at the expense of the first individual. From a wholly moral position, we must be against theft -- taxation. Taxation in every case is a distorting factor in the market.
I agree. But taxation is the only method of funding the government sufficiently. And, because people will free-load as often as they can, a funded government is necessary for the creation of public goods such as roads and parks.
"There has been a great deal of controversy among economists on how to approach the analysis of taxation. Old-fashioned Marshallians insist on the “partial equilibrium” approach of looking only at a particular type of tax, in isolation, and then analyzing its effects; Walrasians, more fashionable today (and exemplified by the late Italian public finance expert, Antonio De Viti De Marco), insist that taxes cannot be considered at all in isolation, that they may be analyzed only in conjunction with what the government does with the proceeds. In all this, what would be the “Austrian” approach, had it been developed, is being neglected. This holds that both procedures are legitimate and necessary to analyze the taxing process fully. In short: the level of taxes-and-expenditures may be analyzed and its inevitable redistributive and distortive effects discussed; and, within this aggregate of taxes, individual types of taxes may then be analyzed in isolation. Neither the partial nor the general approaches should be overlooked."
Economists do this. Austrian economists do not. Why? Because economists use mathematical modeling techniques known as multi-variable regressions. Austrian economists eschew mathematical approaches.
Now, with that said, not only do we have to look at Taxation as the actually specific tax on an individual, or business, but in the aggregate terms, we must also have to look at Government Spending. (...) it bears the immediate brunt of payment. However, even without yet considering the “partial equilibrium” problem of how or whether such taxes are “shifted” by the betel-nut industry onto other shoulders, we should also note that it is not the only one to pay; the consumers of paper certainly pay by finding paper prices raised to them."
This is mostly true. I will only note that calculating who bears any particular tax burden is quite difficult, as every person and every industry has every incentive to push the tax burden onto other people.
Now, let's answer your question about taxing capital. I have found the only people who advocate a tax on capital are the people who do not understand what capital is, and what is accomplishes.
Capital is savings. Not only do you advocate a tax on the very first turn (Actually receiving your wages), now you also want to tax savings (investment) with those all ready taxed wages. Eventually, this freed up time, allows for them to produce nets for everyone, which increases everyones productivity, and ad infinitum)! Capital accruement and investment is the sole reason for our increases in standard of living. To want to tax that, is ludicrous!
Again, this is mostly true. Most international economists are against the direct taxation of capital. Income tax is, as you say, an indirect tax on capital formation. But it is also necessary if you want to have a funded government.
. As you can see the Orthodoxy in America and indeed the world, is not one of Free-Markets, but one of Centrally-Planned Socialist/Fascist Economies. Our world today is not a failure of Free-Markets, but of a failure of Statism. Not only that, regulation has increased tri-fold in the last 10 years. Look at the IRS, EPA, FDA, State regulatory agencies, SEC (Yes, they had more regulations in 2004 than they had in 1992 for example), FDIC, etc.
I’m all for less regulation. But making the claim that America is a centrally planned economy? That’s plain silly.
3. Again I refer to #2. Rhetoric means nothing. Action, consequences, policies, etc. mean everything. We do not have a Free-Market Economy, not even close!!! Globalization is also a part of the Centrally-Planned Economy. Look at NAFTA, GATT, CAFTA, WTO, etc. This is not Free-Trade. This is Neo-Mercantilism regulated, managed, etc. trade. Free-Trade requires a one page agreement between Nation-States, not 2,000+ pages of regulations. Moreover, if we have been pushing for more Globalization how come the US still has an inordinate amount of embargoes, sanctions, and other hostile trade policies to many many countries?
If you examine international trade theorists (which I forgot you mostly did in the next paragraph), you would see that many economists are frustrated with the lack of progress towards free trade that is being made. There are two camps: One argues that these incremental steps are helpful, and will eventually result in true freedom of trade. The second argues such steps are detrimental, as true free-trade will be replaced entirely with these kinds of agreements (NAFTA).
I'm sorry I am out of time for right now. I will continue on the rest of your points when I get a chance.
In short, I agree with the idea of trying to move towards a free market economy, and I agree that it doesn’t seem like there is much progress. However, I think your belief that this results from our currency system is entirely wrong.
Thanks for reading! If you have any rebuttals or questions I would be happy to read and answer them!
I don't have much time to craft an in-depth rebuttal, but I do want to quickly hit on a few fallacies you have fallen into.
First and foremost let me say, that to throw away the wealth of knowledge of the ages is such a travesty and arrogance of the first order I cannot comprehend the mindset one must be in to tell 500 years worth of Economic history and theory that they were all wrong, too stupid, all because you believe Economics is rooted in the minutia of math (Now, I'm not saying this as a personal attack on you, but your actual School of Thought). When talking Economics you cannot use any model to correctly predict human behavior. It is impossible. IS-LM is a farce of the highest order.
I would really enjoy it if you could read this book and post your critique. I will let this book do my talking as it is one of the best Austrian demolitions of Keynesianism and the rest of the interventionist Schools of Thought (Monetarists et. al).
Oh, let me hit on your interest rate fallacy. A high interest rate tells the market there is no savings. The point of the interest rate is to incentivize savings and to discourage loans (Who would take out a loan at 12% for instance?). Why do they do this? Because the banks do not have the funds to loan at 1, or 3, or 7% interest rates. Lower interest rates tells the market that there is more savings because there is more capital freed up. A low interest rate is there to incentivize loans, and discourage savings because there is too much savings currently. As the funds get loaned out interest rates rise. This has many effects, and returns me to the Boom-Bust cycle, once again. Interest rates are critical and they are key. Contrary to Keynesians, capital is not one big blob. You are looking at the aggregates too far away. Look closer. A capital project that takes 30 years and lots of resources, is not the same as a capital project that takes 5 years and little resources. You cannot lump them together. Moreover, finished products, or higher orders of capital (such as for instance, the completed net in my analogy) is not the same, as the laborer mixing his labor with nature and getting the required natural materials.
As a rule, resources are scarce. Interest rates are there to coordinate markets. They specifically tell entreprenuers when to invest in capital projects and when not to. Again, I don't want to get into the cycle again. but interest rates are paramount! Any artificial intervention in the interest rate is necessarily the largest market intervention because interest rates are the key to the whole market.
Again I must point out your inflation fallacies. Let me put it this way. You have in your hand 500 dollars. This 500 dollars can buy you a nice house, and a nice car (scarce resources). The prices reflect among other things Say's law. Along comes the banker. He prints up 800 dollars, and buys three-quarters of the scarce resources. The remaining resources, since now 800 dollars has been infused in the market, prices start to reflect the increased nominal values. So now, when you go to buy that House and Car, you find that you can only afford the car, and not the house, and your wages are slow to raise. How is this not out-right theft? The banker has produced nothing. He has gained enormous wealth by the mere fact he controls monetary policy and the printing press. And let us go one step further, since you believe that hyper-inflation is bad (It's correct definition being 50% or more annual inflation), what is the difference between 50% inflation and 12% inflation? This is generally called the Cantillon Effect, after the correct logical approach by Richard Cantillon more than 250+ years ago (To which you just threw this logical knowledge away). -- http://socserv.mcmaster.ca/econ/ugcm/3ll3/cantillon/essay2.txt
I also must ask how do you explain Stagflation? How do you explain 19th Century deflation correlating to the largest growth ever in Human history? How do you explain the 1921 recovery? How come Bernanke, Samuelson, and Krugman pointed to sound fundamentals in 2007 and how come your models could not account for human behavior even a few months before the crash? How come the Austrians did, and have done so in the past? How many times do you have to get it wrong, and Austrians get it right before you start to accept our theories?
Anyways there is a lot more to get to, but I'd also like you to watch these as they also make my case:
If you could please go through and watch these and respond I would very much appreciate it. When I get off work I will then answer all of your assertions in full. Thanks.
On January 28 2010 04:32 StorkHwaiting wrote: It's because morons run around trying to claim that the free market leads to increased efficiency and prosperity for all as long as everyone just makes decisions in a totally selfish manner. It doesn't. It doesn't work. The past 30 years have shown it doesn't work. It's led to disaster. The globalization and free market proponents were wrong. They did nothing but justify selfishness as a good thing.
Maybe I misunderstood your conclusion, even though you and I both know that it is still the best available system for the world. Capitalism does work, but it just needs some kind of regulation to prevent abuse. I also think you were taking the economic theories too literally.
I think all of this stupid discussion could have been avoided if people weren't so indoctrinated to a statist paradigm where we got to rely on the elitists to tie our shoelaces, to give us food, make the grass grow, etc.
Capitalism, free market isn't a nasty monster that's going to come out from under your bed and eat you, damnit. Capitalism = free people working voluntarily. Anything other than capitalism has to be forced intervention. Be it a democratic government, a dictatorship, communism, whatever it is, if it's not voluntary, guess what, it's central planners telling you what you can or cannot do.
Shit guys, I got the perfect economy solution right here. I do whatever the fuck I want with my money, you do whatever you want with yours, and no one forces the other one to do anything, ok? Can we settle on that or do we have to be perpetually arguing over who has the better plan for everyone else?!? Fuck.
On January 29 2010 10:51 Yurebis wrote: Rothbardian you the man.
I think all of this stupid discussion could have been avoided if people weren't so indoctrinated to a statist paradigm where we got to rely on the elitists to tie our shoelaces, to give us food, make the grass grow, etc.
Capitalism, free market isn't a nasty monster that's going to come out from under your bed and eat you, damnit. Capitalism = free people working voluntarily. Anything other than capitalism has to be forced intervention. Be it a democratic government, a dictatorship, communism, whatever it is, if it's not voluntary, guess what, it's central planners telling you what you can or cannot do.
Shit guys, I got the perfect economy solution right here. I do whatever the fuck I want with my money, you do whatever you want with yours, and no one forces the other one to do anything, ok? Can we settle on that or do we have to be perpetually arguing over who has the better plan for everyone else?!? Fuck.
What if I want to use my money to buy a bomb to blow up your business so that my business next door is more profitable?
On January 29 2010 10:51 Yurebis wrote: Rothbardian you the man.
I think all of this stupid discussion could have been avoided if people weren't so indoctrinated to a statist paradigm where we got to rely on the elitists to tie our shoelaces, to give us food, make the grass grow, etc.
Capitalism, free market isn't a nasty monster that's going to come out from under your bed and eat you, damnit. Capitalism = free people working voluntarily. Anything other than capitalism has to be forced intervention. Be it a democratic government, a dictatorship, communism, whatever it is, if it's not voluntary, guess what, it's central planners telling you what you can or cannot do.
Shit guys, I got the perfect economy solution right here. I do whatever the fuck I want with my money, you do whatever you want with yours, and no one forces the other one to do anything, ok? Can we settle on that or do we have to be perpetually arguing over who has the better plan for everyone else?!? Fuck.
What if I want to use my money to buy a bomb to blow up your business so that my business next door is more profitable?
How anyone can take you seriously is a mystery, you are such a troll and this whole thread is nothing but flame bait.
On January 29 2010 10:51 Yurebis wrote: Rothbardian you the man.
I think all of this stupid discussion could have been avoided if people weren't so indoctrinated to a statist paradigm where we got to rely on the elitists to tie our shoelaces, to give us food, make the grass grow, etc.
Capitalism, free market isn't a nasty monster that's going to come out from under your bed and eat you, damnit. Capitalism = free people working voluntarily. Anything other than capitalism has to be forced intervention. Be it a democratic government, a dictatorship, communism, whatever it is, if it's not voluntary, guess what, it's central planners telling you what you can or cannot do.
Shit guys, I got the perfect economy solution right here. I do whatever the fuck I want with my money, you do whatever you want with yours, and no one forces the other one to do anything, ok? Can we settle on that or do we have to be perpetually arguing over who has the better plan for everyone else?!? Fuck.
What if I want to use my money to buy a bomb to blow up your business so that my business next door is more profitable?
How anyone can take you seriously is a mystery, you are such a troll and this whole thread is nothing but flame bait.
Yeah, it's totally crazy to think people would ever use illegal tactics to get ahead. What a nut I am!
On January 29 2010 10:51 Yurebis wrote: Rothbardian you the man.
I think all of this stupid discussion could have been avoided if people weren't so indoctrinated to a statist paradigm where we got to rely on the elitists to tie our shoelaces, to give us food, make the grass grow, etc.
Capitalism, free market isn't a nasty monster that's going to come out from under your bed and eat you, damnit. Capitalism = free people working voluntarily. Anything other than capitalism has to be forced intervention. Be it a democratic government, a dictatorship, communism, whatever it is, if it's not voluntary, guess what, it's central planners telling you what you can or cannot do.
Shit guys, I got the perfect economy solution right here. I do whatever the fuck I want with my money, you do whatever you want with yours, and no one forces the other one to do anything, ok? Can we settle on that or do we have to be perpetually arguing over who has the better plan for everyone else?!? Fuck.
What if I want to use my money to buy a bomb to blow up your business so that my business next door is more profitable?
That would be punished via you paying for the damage you did to anothers property. Not only that, but people would be disinclined to shop at your business. Advocates of Market-Anarchy, or Laissez-Faire radicalism, advocate for this, in the general broadest sense:
Of liberty I would say that, in the whole plenitude of its extent, it is unobstructed action according to our will. But rightful liberty is unobstructed action according to our will within limits drawn around us by the equal rights of others. I do not add “within the limits of the law,” because law is often but the tyrant’s will, and always so when it violates the right of an individual. -- Thomas Jefferson
Here again though I find it funny you accuse me of a straw-man when I ask you who had a higher standard of living, the pre or post industrial average man when that is a legitimate Economic question, to you, coming in and denouncing Free-Market voluntaryism on the basis of violation of anothers liberty which is in every case inherently criminal. If that isn't a straw-man I don't know what is. It also belies your bias in the fact you believe that the State produces an egalitarian man, or in the very least can influence a person's behavior. If this was so, merely producing a law proclaiming x activity to be illegal would reduce such activity, but in every case it doesn't. Hence, why Prohibition never worked. You buy into the fallacy of Thomas Hobbes. He has scared you to believe that men are inherently evil, and destructive. This is the biggest load of horse patooty I have ever read. If that was the case then all such Voluntary societies would destroy themselves, yet, even before Hobbes there were Voluntary societies that were peaceful and lasted for hundreds of years. Case in point -- Celtic Ireland, Medieval Iceland (around 1000 to 1300), Colonial Pennsylvania, and in the later years to a very large extent the Old West.
The natural state of man, is peaceful voluntary cooperation. We arrive at such conclusions due to the nature of reason. A man is better off in every sense by peaceful voluntary cooperation rather than violent appropriation in a free society. Is not the inherent predicament of man to be self-interested, and of this highest order of self-interest is preservation of life? We see this borne out in Switzerland who have the least restrictive gun laws of any society, and yet the lowest crime rates. If your hypothesis was correct, and that of Hobbes, the mere presence and ease of acquisition would lead to more crime, more death, and more destruction, yet, the exact opposite is true. How do you account for this discrepancy?
Now, the way I see it, what's currently taught in economics and finance classes in America is this concept of globalization, free market, capitalism, and less taxes/regulation = increased economic prosperity.
I want to go ahead and say that's crap.
First, one of the central tenets of modern capitalism is this concept that the "free" market leads to benefit for everyone.
This is wrong. Please choose the correct definition of Capitalism if you're going to discuss it.
Very true, capitalism has never claimed to lead to "benefit for everyone", whatever that means. Rather it claims to lead to the most efficient allocation of resources. And this is true.
On January 29 2010 10:51 Yurebis wrote: Rothbardian you the man.
I think all of this stupid discussion could have been avoided if people weren't so indoctrinated to a statist paradigm where we got to rely on the elitists to tie our shoelaces, to give us food, make the grass grow, etc.
Capitalism, free market isn't a nasty monster that's going to come out from under your bed and eat you, damnit. Capitalism = free people working voluntarily. Anything other than capitalism has to be forced intervention. Be it a democratic government, a dictatorship, communism, whatever it is, if it's not voluntary, guess what, it's central planners telling you what you can or cannot do.
Shit guys, I got the perfect economy solution right here. I do whatever the fuck I want with my money, you do whatever you want with yours, and no one forces the other one to do anything, ok? Can we settle on that or do we have to be perpetually arguing over who has the better plan for everyone else?!? Fuck.
What if I want to use my money to buy a bomb to blow up your business so that my business next door is more profitable?
On January 29 2010 10:51 Yurebis wrote: Rothbardian you the man.
I think all of this stupid discussion could have been avoided if people weren't so indoctrinated to a statist paradigm where we got to rely on the elitists to tie our shoelaces, to give us food, make the grass grow, etc.
Capitalism, free market isn't a nasty monster that's going to come out from under your bed and eat you, damnit. Capitalism = free people working voluntarily. Anything other than capitalism has to be forced intervention. Be it a democratic government, a dictatorship, communism, whatever it is, if it's not voluntary, guess what, it's central planners telling you what you can or cannot do.
Shit guys, I got the perfect economy solution right here. I do whatever the fuck I want with my money, you do whatever you want with yours, and no one forces the other one to do anything, ok? Can we settle on that or do we have to be perpetually arguing over who has the better plan for everyone else?!? Fuck.
What if I want to use my money to buy a bomb to blow up your business so that my business next door is more profitable?
If I know you can buy a bomb I'll undercut that possibility by buying insurance and still come up ahead. Or I can just you know, gather enough evidence and go to a court that's going to judge you as guilty for blowing up my place.
Nothing in capitalism comes about from nowhere. A bank wouldn't be built without the insurance that the likelihood of someone just coming by and stealing it is really low. Whatever risk you can come up with, is a risk that the entrepreneurs already analized and throroughly countered
Your question is like... "what if I 4 pool?" Answer is... I got leet micro y0.
On January 29 2010 10:51 Yurebis wrote: Rothbardian you the man.
I think all of this stupid discussion could have been avoided if people weren't so indoctrinated to a statist paradigm where we got to rely on the elitists to tie our shoelaces, to give us food, make the grass grow, etc.
Capitalism, free market isn't a nasty monster that's going to come out from under your bed and eat you, damnit. Capitalism = free people working voluntarily. Anything other than capitalism has to be forced intervention. Be it a democratic government, a dictatorship, communism, whatever it is, if it's not voluntary, guess what, it's central planners telling you what you can or cannot do.
Shit guys, I got the perfect economy solution right here. I do whatever the fuck I want with my money, you do whatever you want with yours, and no one forces the other one to do anything, ok? Can we settle on that or do we have to be perpetually arguing over who has the better plan for everyone else?!? Fuck.
What if I want to use my money to buy a bomb to blow up your business so that my business next door is more profitable?
That would be punished via you paying for the damage you did to anothers property. Not only that, but people would be disinclined to shop at your business. Advocates of Market-Anarchy, or Laissez-Faire radicalism, advocate for this, in the general broadest sense:
This is under the assumption they have such knowledge. Most cases, we, as a population, do not have such knowledge. =/ Problem with Capitalism, we don't have perfect information.
Let us look at a scenario between a doctor and a patient. The patient needs a treatment, and while it may not necessarily be now, it must be sometime. The patient doesn't know how much a surgery will cost, it could cost $10, it could cost $1,000,000, they simply do not know. After all, how could they? Also, they do not necessarily know the quality of such a product. Could this doctor be a good surgeon, or does his patients usually suffer unusually long times of pain? You say the patient might know from the amount of customers, but how would they find out? Do they stand outside the door all day long? Either way, the opportunity cost of searching up such information could be higher than the gain from knowing it, and furthermore, such information might only be attainable under the loss of a substantial amount of money. So, how would the patient decide whether or not to get this surgery? They could move on, but do they know anymore? This lack of perfect information skews the results of the market, and gives much more than "equal" power between consumer and supplier.
On January 29 2010 08:16 WWJDD wrote: Globalism and Capitalism with no regulations will give you price fixing, sweatshops, child labor, environmental damage (causing cancer on a massive scale (lookup asbestos, or the lawsuit against Exxon Mobil by indigenous people in Ecuador) or coal sludge or nuclear waste), prostitution, human trafficking, dumping, organ trade (lookup organ trade and India), war (the most profitable business known to mankind), terrorism (in response to exploitation), disease (massive amounts of movement of people and food products will always give you more disease) and the rise of robber barons who will siphon money into corporate tax havens like mailboxes in the Caymans or Swiss bank accounts to evade taxes. The only tool the little man has to stop theft on such a large scale is a strong regulatory authority in the form of a government regulatory body that is accountable to it's people. Sadly, corporations the world over have bought large parts of the governments everywhere and we are all screwed.
I used to share the same thoughts of yours but please do take your time to evaluate whether they would be better solved by the state or 'the people'. Capitalism is the free people, I hope you know that. If not, please provide your own definition of capitalism. Some of the problems you brought up were not only state-unsolvable but also directly induced or caused by the state.
Price fixing - can only be done by mandates on price ceilings/floors. unless you mean putting a price tag on any product whatsoever is bad, which I don't think is what you mean. A company, whatever company is free to sell their products at whatever price they wish. If they've started selling it for too high, in a free market, people will buy less from them and entrepreneurs will enter the market to undercut them. If they've raised it just enough so entering the market isn't profitable, well, then it's not so high to cry about it either. What the big men do usually is, use government to raise the price of entry, then raise their prices accordingly. So government does, I believe 100% of the time, help "monopolies" or oligopolies to overprice their stuff.
Sweatshops, child labor - where, and brought about how? are they enslaved? or did they choose to work in bad conditions (compared to ours) because the alternatives were even worse? Humans lived in the mud for millions of years, nothing you can do bout that. There's still people developing out there. Conditions can only be improved by voluntary accumulation of resources, not stealing from the rich and giving it to the poor like you infer. The poor would just consume it and then be left with nothing again. Can't you let the poor decide for themselves whats better for them, anyways?
Environmental damage - who owns the land? The government? If so then... the government let someone in and shit on their yard to make a buck? Would make sense, since governments have no incentive to preserve anything past the point of reelection. Privatization is the best choice to end environmental problems since someone gets to be the arbiter of what can or cannot be done with the resources. If it can't be privatized.. even still, there's examples out there of ostracism working between fishing communities (don't remember from where, sorry) to stop people from overfishing and stuff. No need to run for the gun man, keep it down please. People can work out solutions without violence, believe it.
Prostitution, human trafficking, etc. - Yes, lets also attribute murder and theft of every sort as a product of capitalism and not just sick people you know, because in the state, there's only angels. How do you go about resolving that? Is it through government regulation and police force? That doesn't seem to be working at all, does it. In fact I would argue that it facilitates it because the failing agencies and regulations are misdirecting human resources that could be employed in perhaps a more efficient way. I don't know how it could be solved, do you? Would a 100% planned economy solve that? What do you, mr. statist, plan on forcing people to do, to stop them from doing imoral-activity-X? And why do you think that would work better than millions of people working together to solve it voluntarily?
War, terrorism - Would war and terrorism even happen in a world without a state? War only happens on the prospect of enslaving a foreign population, and by enslaving today, I mean taxing. Without a pre-formed system of taxation, the cost of going house-to-house with guns and tanks, forcing each one to pay you some tax, would far exceed the gains from it. Because guess what, people will prepare and will fight back that which is seen as illegitimate. Once any form of statism is seen as illegitimate, taxation and slavery will be way more costly to institute once again. Terrorism is a response to exploitation alright.. but just you guess, against whom?
Disease - Please, blaming the people for their own sickness? And the state solves that how? Managed healthcare?
Robber Barons - Stealing... how are they stealing? They're stealing the money people voluntarily pay to them for their cheap products and services? Sorry, that's not stealing. The only theft that could be made on such a massive scale is, dun dun, through the state. Even if you ignore the moral hazard and wants to steal the money justly acquired by the big capitalists and use it for your "altruistic" ends, odds are you're going to make some crappy business model plan and run out of money soon afterwards, because what you get easy, you let go easily too. Central planning can never make decent models because they do not have the consumer at the end of their calculations, they have abstract numbers that they think represents "prosperity and efficiency to all"...
If you got a business plan that works, you ain't going to pass it as law, you're going out there and implement it voluntarily, with investors, statistics, etc., and it's going to bloom or bust, but whatever happens, it's because people voluntarily chose it to be so. Malinvestments happen, good investments happen too. But at least the malinvestments are liquidated as soon as they're realized in the market, and don't persist forever or until some other guy in some other term decides to change it a bit (more often than not, for worse)
First and foremost let me say, that to throw away the wealth of knowledge of the ages is such a travesty and arrogance of the first order I cannot comprehend the mindset one must be in to tell 500 years worth of Economic history and theory that they were all wrong, too stupid, all because you believe Economics is rooted in the minutia of math (Now, I'm not saying this as a personal attack on you, but your actual School of Thought)
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I think this is more than a little extreme. I don’t believe I said anything to the effect of: “You economists in the past were stupid for believing the things you did”. I may be in the minority here, but I tend to think of Economics as the most “scientific” social science. Why? Because economists have access to much more reliable data than other social scientists. You CAN compare growth rates across countries, you CAN measure GDP per capita. Other social sciences have a more difficult time because they must ask questions that attempt to quantify things that can’t really be compared (A seven out of ten for “how happy are you” means different things to different people).
Thus, just like a science when new economic theories and models are introduced that better explain economic activity, I think it perfectly natural to replace the older, not-as-accurate models.
Finally, economics IS rooted in the minutia of math. Math is logic. If you want to create a logical argument, math is a necessary foundation.
When talking Economics you cannot use any model to correctly predict human behavior. It is impossible. IS-LM is a farce of the highest order
Is this an exaggeration? Many models correctly predict human behavior. Perhaps your problem is that economics is not a hard science? You think economic models should be able to say how each individual person will respond? That IS impossible. There is not enough data. What is perfectly reasonable, however, is to make predictions about aggregate populations. IS-LM is a basic model used to teach students about the simple aspects of monetary and fiscal policy.
I would really enjoy it if you could read this book and post your critique. I will let this book do my talking as it is one of the best Austrian demolitions of Keynesianism and the rest of the interventionist Schools of Thought (Monetarists et. al).
This is a long book. I will start reading it, but don’t expect anything immediate. I will only note now that the book is published in 1959, so the failure of the “new economies” it describes must be those before that year. That isn’t really “new” any more.
let me hit on your interest rate fallacy.
What is my fallacy?
The point of the interest rate is to incentivize savings and to discourage loans (Who would take out a loan at 12% for instance?). Why do they do this? Because the banks do not have the funds to loan at 1, or 3, or 7% interest rates. Lower interest rates tells the market that there is more savings because there is more capital freed up. As a rule, resources are scarce. Interest rates are there to coordinate markets. They specifically tell entreprenuers when to invest in capital projects and when not to. Again, I don't want to get into the cycle again. but interest rates are paramount!
A bank would charge 12% instead of 3% or 7% because the demand for loans is higher. Think of the interest rate as the “price” of a loan. When many people want loans, the interest rate rises. When people don’t want loans, the interest rate falls. Thus, demand for loanable funds “tells” the market what the interest rate is, not the other way around.
After re-reading this section, I think you arrive at your conclusion because you are solely focused on the supply-side of loans. A lack of funds has rarely been the driving mechanism for changes in the interest rate.
Any artificial intervention in the interest rate is necessarily the largest market intervention because interest rates are the key to the whole market.
It almost sounds to me like you might be confusing the Federal Reserve’s interest rate setting with interest rates charged by private banks. The Federal Reserve only sets the discount rate, which is the interest rate charged to commercial banks on loans from the Federal Reserve. While the Fed’s rate indirectly influences the bank’s rates, it is not a one-for-one ratio. One needs to consider the demand curve as well.
Again I must point out your inflation fallacies.
Which fallacies?
Let me put it this way. You have in your hand 500 dollars. (...) He has gained enormous wealth by the mere fact he controls monetary policy and the printing press.
There are many problems with this. Who is the banker? The government? Are you suggesting that government investment results in the crowding-out of private investment? Is the government spending all of that money on investment or consumer goods? Or is it paying the wages of millions of employees?
And let us go one step further, since you believe that hyper-inflation is bad (It's correct definition being 50% or more annual inflation), what is the difference between 50% inflation and 12% inflation?
Menu costs. At 50% inflation, store owners are forced to change their prices every week to prevent their stores from losing money. At 12%, stores still “lose” money, but it is a MUCH smaller percentage. At 3%, it’s even smaller yet. Stores still change their prices regularly, but do so more often to adjust to changes in demand than to inflation. For example, a restaurant will rarely raise all prices at once, which one would expect if they were responding to inflation. Rather, they raise the prices on their most popular items.
The real problem with inflation is unexpected inflation (inflation rates that are different, whether more or less, than the expected rate). Unexpected inflation creates uncertainty in markets. When the inflation rate is constant, or varies little, as it does in the US, people input the inflation rate into their decision making process.
I also must ask how do you explain Stagflation? How do you explain 19th Century deflation correlating to the largest growth ever in Human history? How do you explain the 1921 recovery? How come Bernanke, Samuelson, and Krugman pointed to sound fundamentals in 2007 and how come your models could not account for human behavior even a few months before the crash? How come the Austrians did, and have done so in the past? How many times do you have to get it wrong, and Austrians get it right before you start to accept our theories?
I was under the impression that the current view of stagflation is that it occurred when the costs of production were increased by an external force (aka tax or government mandates). The stagflation in the 70’s is seen to result from Nixon’s wage and price controls of 1971.
19th century deflation is not a topic I have ever looked at. A quick search doesn’t point me to what you are talking about. Could you perhaps provide me a link or a specific event so I could look at it?
What would have been the response if Bernanke hadn’t said that? Consider that businesses and stock brokers used to make financial decisions based off of the color of Greenspan’s tie. If Bernanke had said “we’re screwed”, we would have been. Immediately. More so than we are now.
I will watch your movies as well when I have time. (Which will be later today or tomorrow)
Thanks for reading! As usual, I look forward to your thoughts.
On January 29 2010 10:51 Yurebis wrote: Rothbardian you the man.
I think all of this stupid discussion could have been avoided if people weren't so indoctrinated to a statist paradigm where we got to rely on the elitists to tie our shoelaces, to give us food, make the grass grow, etc.
Capitalism, free market isn't a nasty monster that's going to come out from under your bed and eat you, damnit. Capitalism = free people working voluntarily. Anything other than capitalism has to be forced intervention. Be it a democratic government, a dictatorship, communism, whatever it is, if it's not voluntary, guess what, it's central planners telling you what you can or cannot do.
Shit guys, I got the perfect economy solution right here. I do whatever the fuck I want with my money, you do whatever you want with yours, and no one forces the other one to do anything, ok? Can we settle on that or do we have to be perpetually arguing over who has the better plan for everyone else?!? Fuck.
What if I want to use my money to buy a bomb to blow up your business so that my business next door is more profitable?
That would be punished via you paying for the damage you did to anothers property. Not only that, but people would be disinclined to shop at your business. Advocates of Market-Anarchy, or Laissez-Faire radicalism, advocate for this, in the general broadest sense:
This is under the assumption they have such knowledge. Most cases, we, as a population, do not have such knowledge. =/ Problem with Capitalism, we don't have perfect information.
Let us look at a scenario between a doctor and a patient. The patient needs a treatment, and while it may not necessarily be now, it must be sometime. The patient doesn't know how much a surgery will cost, it could cost $10, it could cost $1,000,000, they simply do not know. After all, how could they? Also, they do not necessarily know the quality of such a product. Could this doctor be a good surgeon, or does his patients usually suffer unusually long times of pain? You say the patient might know from the amount of customers, but how would they find out? Do they stand outside the door all day long? Either way, the opportunity cost of searching up such information could be higher than the gain from knowing it, and furthermore, such information might only be attainable under the loss of a substantial amount of money. So, how would the patient decide whether or not to get this surgery? They could move on, but do they know anymore? This lack of perfect information skews the results of the market, and gives much more than "equal" power between consumer and supplier.
The state doesn't have perfect information either... in fact they have a lesser incentive to, because the business to which they attend are not their own, but of others they may never meet or come face to face with.
May I propose that the question should be not "whether you can make the right choices?" but "who has the best incentives to make the right choices?" plus "right choices for who?"
On January 29 2010 10:51 Yurebis wrote: Rothbardian you the man.
I think all of this stupid discussion could have been avoided if people weren't so indoctrinated to a statist paradigm where we got to rely on the elitists to tie our shoelaces, to give us food, make the grass grow, etc.
Capitalism, free market isn't a nasty monster that's going to come out from under your bed and eat you, damnit. Capitalism = free people working voluntarily. Anything other than capitalism has to be forced intervention. Be it a democratic government, a dictatorship, communism, whatever it is, if it's not voluntary, guess what, it's central planners telling you what you can or cannot do.
Shit guys, I got the perfect economy solution right here. I do whatever the fuck I want with my money, you do whatever you want with yours, and no one forces the other one to do anything, ok? Can we settle on that or do we have to be perpetually arguing over who has the better plan for everyone else?!? Fuck.
What if I want to use my money to buy a bomb to blow up your business so that my business next door is more profitable?
That would be punished via you paying for the damage you did to anothers property. Not only that, but people would be disinclined to shop at your business. Advocates of Market-Anarchy, or Laissez-Faire radicalism, advocate for this, in the general broadest sense:
This is under the assumption they have such knowledge. Most cases, we, as a population, do not have such knowledge. =/ Problem with Capitalism, we don't have perfect information.
Let us look at a scenario between a doctor and a patient. The patient needs a treatment, and while it may not necessarily be now, it must be sometime. The patient doesn't know how much a surgery will cost, it could cost $10, it could cost $1,000,000, they simply do not know. After all, how could they? Also, they do not necessarily know the quality of such a product. Could this doctor be a good surgeon, or does his patients usually suffer unusually long times of pain? You say the patient might know from the amount of customers, but how would they find out? Do they stand outside the door all day long? Either way, the opportunity cost of searching up such information could be higher than the gain from knowing it, and furthermore, such information might only be attainable under the loss of a substantial amount of money. So, how would the patient decide whether or not to get this surgery? They could move on, but do they know anymore? This lack of perfect information skews the results of the market, and gives much more than "equal" power between consumer and supplier.
The state doesn't have perfect information either... in fact they have a lesser incentive to, because the business to which they attend are not their own, but of others they may never meet or come face to face with.
May I propose that the question should be not "whether you can make the right choices?" but "who has the best incentives to make the right choices?" plus "right choices for who?"
No, the state doesn't, but it will usually have much better information than an individual. Incentives play no role in this as "right choices" are 1. Opinion based, unless you're talking of economically efficient being the right choice, but that completely disregards morality. 2. Relies upon the assumption there are choices available. 3. Relies upon that the option of a "right choice" is available. Which, often times, there isn't. Without perfect information, or at least even DECENT information, no right choice is forseeable.
Now, let us add a new number into my hypothesis above. Suppose the "right amount" or "equilibrium price" was $50,000. How could the patient EVER get to that price if each doctor charges him $500,000+ or nothing, and he doesn't have the information to offer $50,000? How can he argue against the doctors without sufficient medical knowledge?
First and foremost let me say, that to throw away the wealth of knowledge of the ages is such a travesty and arrogance of the first order I cannot comprehend the mindset one must be in to tell 500 years worth of Economic history and theory that they were all wrong, too stupid, all because you believe Economics is rooted in the minutia of math (Now, I'm not saying this as a personal attack on you, but your actual School of Thought)
.
I think this is more than a little extreme. I don’t believe I said anything to the effect of: “You economists in the past were stupid for believing the things you did”. I may be in the minority here, but I tend to think of Economics as the most “scientific” social science. Why? Because economists have access to much more reliable data than other social scientists. You CAN compare growth rates across countries, you CAN measure GDP per capita. Other social sciences have a more difficult time because they must ask questions that attempt to quantify things that can’t really be compared (A seven out of ten for “how happy are you” means different things to different people).
Thus, just like a science when new economic theories and models are introduced that better explain economic activity, I think it perfectly natural to replace the older, not-as-accurate models.
Finally, economics IS rooted in the minutia of math. Math is logic. If you want to create a logical argument, math is a necessary foundation.
When talking Economics you cannot use any model to correctly predict human behavior. It is impossible. IS-LM is a farce of the highest order
Is this an exaggeration? Many models correctly predict human behavior. Perhaps your problem is that economics is not a hard science? You think economic models should be able to say how each individual person will respond? That IS impossible. There is not enough data. What is perfectly reasonable, however, is to make predictions about aggregate populations. IS-LM is a basic model used to teach students about the simple aspects of monetary and fiscal policy.
I would really enjoy it if you could read this book and post your critique. I will let this book do my talking as it is one of the best Austrian demolitions of Keynesianism and the rest of the interventionist Schools of Thought (Monetarists et. al).
This is a long book. I will start reading it, but don’t expect anything immediate. I will only note now that the book is published in 1959, so the failure of the “new economies” it describes must be those before that year. That isn’t really “new” any more.
The point of the interest rate is to incentivize savings and to discourage loans (Who would take out a loan at 12% for instance?). Why do they do this? Because the banks do not have the funds to loan at 1, or 3, or 7% interest rates. Lower interest rates tells the market that there is more savings because there is more capital freed up. As a rule, resources are scarce. Interest rates are there to coordinate markets. They specifically tell entreprenuers when to invest in capital projects and when not to. Again, I don't want to get into the cycle again. but interest rates are paramount!
A bank would charge 12% instead of 3% or 7% because the demand for loans is higher. Think of the interest rate as the “price” of a loan. When many people want loans, the interest rate rises. When people don’t want loans, the interest rate falls. Thus, demand for loanable funds “tells” the market what the interest rate is, not the other way around.
After re-reading this section, I think you arrive at your conclusion because you are solely focused on the supply-side of loans. A lack of funds has rarely been the driving mechanism for changes in the interest rate.
Any artificial intervention in the interest rate is necessarily the largest market intervention because interest rates are the key to the whole market.
It almost sounds to me like you might be confusing the Federal Reserve’s interest rate setting with interest rates charged by private banks. The Federal Reserve only sets the discount rate, which is the interest rate charged to commercial banks on loans from the Federal Reserve. While the Fed’s rate indirectly influences the bank’s rates, it is not a one-for-one ratio. One needs to consider the demand curve as well.
Let me put it this way. You have in your hand 500 dollars. (...) He has gained enormous wealth by the mere fact he controls monetary policy and the printing press.
There are many problems with this. Who is the banker? The government? Are you suggesting that government investment results in the crowding-out of private investment? Is the government spending all of that money on investment or consumer goods? Or is it paying the wages of millions of employees?
And let us go one step further, since you believe that hyper-inflation is bad (It's correct definition being 50% or more annual inflation), what is the difference between 50% inflation and 12% inflation?
Menu costs. At 50% inflation, store owners are forced to change their prices every week to prevent their stores from losing money. At 12%, stores still “lose” money, but it is a MUCH smaller percentage. At 3%, it’s even smaller yet. Stores still change their prices regularly, but do so more often to adjust to changes in demand than to inflation. For example, a restaurant will rarely raise all prices at once, which one would expect if they were responding to inflation. Rather, they raise the prices on their most popular items.
The real problem with inflation is unexpected inflation (inflation rates that are different, whether more or less, than the expected rate). Unexpected inflation creates uncertainty in markets. When the inflation rate is constant, or varies little, as it does in the US, people input the inflation rate into their decision making process.
I also must ask how do you explain Stagflation? How do you explain 19th Century deflation correlating to the largest growth ever in Human history? How do you explain the 1921 recovery? How come Bernanke, Samuelson, and Krugman pointed to sound fundamentals in 2007 and how come your models could not account for human behavior even a few months before the crash? How come the Austrians did, and have done so in the past? How many times do you have to get it wrong, and Austrians get it right before you start to accept our theories?
I was under the impression that the current view of stagflation is that it occurred when the costs of production were increased by an external force (aka tax or government mandates). The stagflation in the 70’s is seen to result from Nixon’s wage and price controls of 1971.
19th century deflation is not a topic I have ever looked at. A quick search doesn’t point me to what you are talking about. Could you perhaps provide me a link or a specific event so I could look at it?
What would have been the response if Bernanke hadn’t said that? Consider that businesses and stock brokers used to make financial decisions based off of the color of Greenspan’s tie. If Bernanke had said “we’re screwed”, we would have been. Immediately. More so than we are now.
I will watch your movies as well when I have time. (Which will be later today or tomorrow)
Thanks for reading! As usual, I look forward to your thoughts.
Your fallacy is not understanding the Cantillon Effect. I have put the links in my post there for you, from both Cantillon and Mises.
Secondly, while you may not be overtly saying that everything that has come before is wrong, you surely are saying it between the lines. There are immutable logical laws in Economics which you fail to account for. For example, Say's Law. Economics is indeed a Science, but not a Science rooted in math. It is an axiomatic, logical Science. And the structure of math, yes, is logical, but the facts or distortions derived from math in Econometrics which is all statistics, cannot be a basis for a theory. You cannot explain an event using statistics. I think everyone knows the quip about statistics. In the general sense, statistics cannot tell you what caused the statistics, in that, you cannot derive for example, the subjective marginal utility of one person from another on a simple formula. Cardinal and Ordinal are mixed up in the world of Keynesians.
Anyways, I look forward to you reading that book and watching those videos. Likewise, after I finish Austrian Perspective to History of Economic Thought, I'll be chalking up my next reading assignment to a work from Samuelson.
I will quickly quip though, that you still do not understand the foundational basis for interest rates, and how they are calculated. The easiest thing to know about interest rates, is that it is both an incentivization tool, and a coordination tool for entreprenuers. It's the old saying of Time Preference. Interest rates are the single most important market phenomena, and likewise, instituting a homogenous rate through all localities, is absurd on its face. Interest rates reflect savings, and savings in differing localities will obviously be different. Interest rates should be acquired through it's natural process in the market. We call this the natural rate of interest. Only the market can produce the inter-temporal equilibrium to prevent such widespread booms and busts.
On January 29 2010 10:51 Yurebis wrote: Rothbardian you the man.
I think all of this stupid discussion could have been avoided if people weren't so indoctrinated to a statist paradigm where we got to rely on the elitists to tie our shoelaces, to give us food, make the grass grow, etc.
Capitalism, free market isn't a nasty monster that's going to come out from under your bed and eat you, damnit. Capitalism = free people working voluntarily. Anything other than capitalism has to be forced intervention. Be it a democratic government, a dictatorship, communism, whatever it is, if it's not voluntary, guess what, it's central planners telling you what you can or cannot do.
Shit guys, I got the perfect economy solution right here. I do whatever the fuck I want with my money, you do whatever you want with yours, and no one forces the other one to do anything, ok? Can we settle on that or do we have to be perpetually arguing over who has the better plan for everyone else?!? Fuck.
What if I want to use my money to buy a bomb to blow up your business so that my business next door is more profitable?
That would be punished via you paying for the damage you did to anothers property. Not only that, but people would be disinclined to shop at your business. Advocates of Market-Anarchy, or Laissez-Faire radicalism, advocate for this, in the general broadest sense:
This is under the assumption they have such knowledge. Most cases, we, as a population, do not have such knowledge. =/ Problem with Capitalism, we don't have perfect information.
Let us look at a scenario between a doctor and a patient. The patient needs a treatment, and while it may not necessarily be now, it must be sometime. The patient doesn't know how much a surgery will cost, it could cost $10, it could cost $1,000,000, they simply do not know. After all, how could they? Also, they do not necessarily know the quality of such a product. Could this doctor be a good surgeon, or does his patients usually suffer unusually long times of pain? You say the patient might know from the amount of customers, but how would they find out? Do they stand outside the door all day long? Either way, the opportunity cost of searching up such information could be higher than the gain from knowing it, and furthermore, such information might only be attainable under the loss of a substantial amount of money. So, how would the patient decide whether or not to get this surgery? They could move on, but do they know anymore? This lack of perfect information skews the results of the market, and gives much more than "equal" power between consumer and supplier.
The state doesn't have perfect information either... in fact they have a lesser incentive to, because the business to which they attend are not their own, but of others they may never meet or come face to face with.
May I propose that the question should be not "whether you can make the right choices?" but "who has the best incentives to make the right choices?" plus "right choices for who?"
No, the state doesn't, but it will usually have much better information than an individual. Incentives play no role in this as "right choices" are 1. Opinion based, unless you're talking of economically efficient being the right choice, but that completely disregards morality. 2. Relies upon the assumption there are choices available. 3. Relies upon that the option of a "right choice" is available. Which, often times, there isn't. Without perfect information, or at least even DECENT information, no right choice is forseeable.
Now, let us add a new number into my hypothesis above. Suppose the "right amount" or "equilibrium price" was $50,000. How could the patient EVER get to that price if each doctor charges him $500,000+ or nothing, and he doesn't have the information to offer $50,000? How can he argue against the doctors without sufficient medical knowledge?
Wait... who says what the equilibrium price is? IMO there is no equilibrium price (there is no spoon luls).. I think if you're really interested about the aspects of trade you should study uh catallactics.
The state has *no way* of knowing how much *you* value anything because that which you value can only be known after-the-fact, only after you buy something or perhaps even assert your wish to buy something for a certain cost do we know that you value the "something" more than the "cost" (in dollars if it may be)
A trade is made because both parties value the objects being traded differently! Can we agree on <--- that?
First and foremost let me say, that to throw away the wealth of knowledge of the ages is such a travesty and arrogance of the first order I cannot comprehend the mindset one must be in to tell 500 years worth of Economic history and theory that they were all wrong, too stupid, all because you believe Economics is rooted in the minutia of math (Now, I'm not saying this as a personal attack on you, but your actual School of Thought)
.
I think this is more than a little extreme. I don’t believe I said anything to the effect of: “You economists in the past were stupid for believing the things you did”. I may be in the minority here, but I tend to think of Economics as the most “scientific” social science. Why? Because economists have access to much more reliable data than other social scientists. You CAN compare growth rates across countries, you CAN measure GDP per capita. Other social sciences have a more difficult time because they must ask questions that attempt to quantify things that can’t really be compared (A seven out of ten for “how happy are you” means different things to different people).
Thus, just like a science when new economic theories and models are introduced that better explain economic activity, I think it perfectly natural to replace the older, not-as-accurate models.
Finally, economics IS rooted in the minutia of math. Math is logic. If you want to create a logical argument, math is a necessary foundation.
When talking Economics you cannot use any model to correctly predict human behavior. It is impossible. IS-LM is a farce of the highest order
Is this an exaggeration? Many models correctly predict human behavior. Perhaps your problem is that economics is not a hard science? You think economic models should be able to say how each individual person will respond? That IS impossible. There is not enough data. What is perfectly reasonable, however, is to make predictions about aggregate populations. IS-LM is a basic model used to teach students about the simple aspects of monetary and fiscal policy.
I would really enjoy it if you could read this book and post your critique. I will let this book do my talking as it is one of the best Austrian demolitions of Keynesianism and the rest of the interventionist Schools of Thought (Monetarists et. al).
This is a long book. I will start reading it, but don’t expect anything immediate. I will only note now that the book is published in 1959, so the failure of the “new economies” it describes must be those before that year. That isn’t really “new” any more.
let me hit on your interest rate fallacy.
What is my fallacy?
The point of the interest rate is to incentivize savings and to discourage loans (Who would take out a loan at 12% for instance?). Why do they do this? Because the banks do not have the funds to loan at 1, or 3, or 7% interest rates. Lower interest rates tells the market that there is more savings because there is more capital freed up. As a rule, resources are scarce. Interest rates are there to coordinate markets. They specifically tell entreprenuers when to invest in capital projects and when not to. Again, I don't want to get into the cycle again. but interest rates are paramount!
A bank would charge 12% instead of 3% or 7% because the demand for loans is higher. Think of the interest rate as the “price” of a loan. When many people want loans, the interest rate rises. When people don’t want loans, the interest rate falls. Thus, demand for loanable funds “tells” the market what the interest rate is, not the other way around.
After re-reading this section, I think you arrive at your conclusion because you are solely focused on the supply-side of loans. A lack of funds has rarely been the driving mechanism for changes in the interest rate.
Any artificial intervention in the interest rate is necessarily the largest market intervention because interest rates are the key to the whole market.
It almost sounds to me like you might be confusing the Federal Reserve’s interest rate setting with interest rates charged by private banks. The Federal Reserve only sets the discount rate, which is the interest rate charged to commercial banks on loans from the Federal Reserve. While the Fed’s rate indirectly influences the bank’s rates, it is not a one-for-one ratio. One needs to consider the demand curve as well.
Again I must point out your inflation fallacies.
Which fallacies?
Let me put it this way. You have in your hand 500 dollars. (...) He has gained enormous wealth by the mere fact he controls monetary policy and the printing press.
There are many problems with this. Who is the banker? The government? Are you suggesting that government investment results in the crowding-out of private investment? Is the government spending all of that money on investment or consumer goods? Or is it paying the wages of millions of employees?
And let us go one step further, since you believe that hyper-inflation is bad (It's correct definition being 50% or more annual inflation), what is the difference between 50% inflation and 12% inflation?
Menu costs. At 50% inflation, store owners are forced to change their prices every week to prevent their stores from losing money. At 12%, stores still “lose” money, but it is a MUCH smaller percentage. At 3%, it’s even smaller yet. Stores still change their prices regularly, but do so more often to adjust to changes in demand than to inflation. For example, a restaurant will rarely raise all prices at once, which one would expect if they were responding to inflation. Rather, they raise the prices on their most popular items.
The real problem with inflation is unexpected inflation (inflation rates that are different, whether more or less, than the expected rate). Unexpected inflation creates uncertainty in markets. When the inflation rate is constant, or varies little, as it does in the US, people input the inflation rate into their decision making process.
I also must ask how do you explain Stagflation? How do you explain 19th Century deflation correlating to the largest growth ever in Human history? How do you explain the 1921 recovery? How come Bernanke, Samuelson, and Krugman pointed to sound fundamentals in 2007 and how come your models could not account for human behavior even a few months before the crash? How come the Austrians did, and have done so in the past? How many times do you have to get it wrong, and Austrians get it right before you start to accept our theories?
I was under the impression that the current view of stagflation is that it occurred when the costs of production were increased by an external force (aka tax or government mandates). The stagflation in the 70’s is seen to result from Nixon’s wage and price controls of 1971.
19th century deflation is not a topic I have ever looked at. A quick search doesn’t point me to what you are talking about. Could you perhaps provide me a link or a specific event so I could look at it?
What would have been the response if Bernanke hadn’t said that? Consider that businesses and stock brokers used to make financial decisions based off of the color of Greenspan’s tie. If Bernanke had said “we’re screwed”, we would have been. Immediately. More so than we are now.
I will watch your movies as well when I have time. (Which will be later today or tomorrow)
Thanks for reading! As usual, I look forward to your thoughts.
Anyways, I look forward to you reading that book and watching those videos. Likewise, after I finish Austrian Perspective to History of Economic Thought, I'll be chalking up my next reading assignment to a work from Samuelson.
U so pimp rothbardian I wanna be like you when I grow up lolololo
On January 29 2010 12:05 lixlix wrote: Yurebis, you seem to advocate a type of anarchy that is very different from what Rothbardian is talking about.
Your commentary on child labor is some of the most silly and elitist things I've ever read.
"The poor would just consume it and then be left with nothing again. Can't you let the poor decide for themselves whats better for them, anyways?"
really? it seems you've already decided what the poor would choose.
wowowow hold on a second, I was talking about the type of government intervention one would prescribe to those less fortunated ones. Welfare doesn't help nobody. I have decided what they would choose? What have I decided for them?
On January 29 2010 10:51 Yurebis wrote: Rothbardian you the man.
I think all of this stupid discussion could have been avoided if people weren't so indoctrinated to a statist paradigm where we got to rely on the elitists to tie our shoelaces, to give us food, make the grass grow, etc.
Capitalism, free market isn't a nasty monster that's going to come out from under your bed and eat you, damnit. Capitalism = free people working voluntarily. Anything other than capitalism has to be forced intervention. Be it a democratic government, a dictatorship, communism, whatever it is, if it's not voluntary, guess what, it's central planners telling you what you can or cannot do.
Shit guys, I got the perfect economy solution right here. I do whatever the fuck I want with my money, you do whatever you want with yours, and no one forces the other one to do anything, ok? Can we settle on that or do we have to be perpetually arguing over who has the better plan for everyone else?!? Fuck.
What if I want to use my money to buy a bomb to blow up your business so that my business next door is more profitable?
That would be punished via you paying for the damage you did to anothers property. Not only that, but people would be disinclined to shop at your business. Advocates of Market-Anarchy, or Laissez-Faire radicalism, advocate for this, in the general broadest sense:
This is under the assumption they have such knowledge. Most cases, we, as a population, do not have such knowledge. =/ Problem with Capitalism, we don't have perfect information.
Let us look at a scenario between a doctor and a patient. The patient needs a treatment, and while it may not necessarily be now, it must be sometime. The patient doesn't know how much a surgery will cost, it could cost $10, it could cost $1,000,000, they simply do not know. After all, how could they? Also, they do not necessarily know the quality of such a product. Could this doctor be a good surgeon, or does his patients usually suffer unusually long times of pain? You say the patient might know from the amount of customers, but how would they find out? Do they stand outside the door all day long? Either way, the opportunity cost of searching up such information could be higher than the gain from knowing it, and furthermore, such information might only be attainable under the loss of a substantial amount of money. So, how would the patient decide whether or not to get this surgery? They could move on, but do they know anymore? This lack of perfect information skews the results of the market, and gives much more than "equal" power between consumer and supplier.
The state doesn't have perfect information either... in fact they have a lesser incentive to, because the business to which they attend are not their own, but of others they may never meet or come face to face with.
May I propose that the question should be not "whether you can make the right choices?" but "who has the best incentives to make the right choices?" plus "right choices for who?"
No, the state doesn't, but it will usually have much better information than an individual. Incentives play no role in this as "right choices" are 1. Opinion based, unless you're talking of economically efficient being the right choice, but that completely disregards morality. 2. Relies upon the assumption there are choices available. 3. Relies upon that the option of a "right choice" is available. Which, often times, there isn't. Without perfect information, or at least even DECENT information, no right choice is forseeable.
Now, let us add a new number into my hypothesis above. Suppose the "right amount" or "equilibrium price" was $50,000. How could the patient EVER get to that price if each doctor charges him $500,000+ or nothing, and he doesn't have the information to offer $50,000? How can he argue against the doctors without sufficient medical knowledge?
Wait... who says what the equilibrium price is? IMO there is no equilibrium price (there is no spoon luls).. I think if you're really interested about the aspects of trade you should study uh catallactics.
The state has *no way* of knowing how much *you* value anything because that which you value can only be known after-the-fact, only after you buy something or perhaps even assert your wish to buy something for a certain cost do we know that you value the "something" more than the "cost" (in dollars if it may be)
A trade is made because both parties value the objects being traded differently! Can we agree on <--- that?
Equilibrium price is the price determined by the market given a supply and demand schedule which is the aggregate of people's personal demands and the suppliers personal well, supplies. But fair enough if you do not believe in an equilibrium price. And no, the state really doesn't. That's a problem with it, and the problem with the market is lack of perfect information. Thus, we can't really say one is the best, only that in certain circumstances, one is preferred over another. =/ Yes, I agree with that assumption. Sorry if I'm frustrating you.
First and foremost let me say, that to throw away the wealth of knowledge of the ages is such a travesty and arrogance of the first order I cannot comprehend the mindset one must be in to tell 500 years worth of Economic history and theory that they were all wrong, too stupid, all because you believe Economics is rooted in the minutia of math (Now, I'm not saying this as a personal attack on you, but your actual School of Thought)
.
I think this is more than a little extreme. I don’t believe I said anything to the effect of: “You economists in the past were stupid for believing the things you did”. I may be in the minority here, but I tend to think of Economics as the most “scientific” social science. Why? Because economists have access to much more reliable data than other social scientists. You CAN compare growth rates across countries, you CAN measure GDP per capita. Other social sciences have a more difficult time because they must ask questions that attempt to quantify things that can’t really be compared (A seven out of ten for “how happy are you” means different things to different people).
Thus, just like a science when new economic theories and models are introduced that better explain economic activity, I think it perfectly natural to replace the older, not-as-accurate models.
Finally, economics IS rooted in the minutia of math. Math is logic. If you want to create a logical argument, math is a necessary foundation.
When talking Economics you cannot use any model to correctly predict human behavior. It is impossible. IS-LM is a farce of the highest order
Is this an exaggeration? Many models correctly predict human behavior. Perhaps your problem is that economics is not a hard science? You think economic models should be able to say how each individual person will respond? That IS impossible. There is not enough data. What is perfectly reasonable, however, is to make predictions about aggregate populations. IS-LM is a basic model used to teach students about the simple aspects of monetary and fiscal policy.
I would really enjoy it if you could read this book and post your critique. I will let this book do my talking as it is one of the best Austrian demolitions of Keynesianism and the rest of the interventionist Schools of Thought (Monetarists et. al).
This is a long book. I will start reading it, but don’t expect anything immediate. I will only note now that the book is published in 1959, so the failure of the “new economies” it describes must be those before that year. That isn’t really “new” any more.
let me hit on your interest rate fallacy.
What is my fallacy?
The point of the interest rate is to incentivize savings and to discourage loans (Who would take out a loan at 12% for instance?). Why do they do this? Because the banks do not have the funds to loan at 1, or 3, or 7% interest rates. Lower interest rates tells the market that there is more savings because there is more capital freed up. As a rule, resources are scarce. Interest rates are there to coordinate markets. They specifically tell entreprenuers when to invest in capital projects and when not to. Again, I don't want to get into the cycle again. but interest rates are paramount!
A bank would charge 12% instead of 3% or 7% because the demand for loans is higher. Think of the interest rate as the “price” of a loan. When many people want loans, the interest rate rises. When people don’t want loans, the interest rate falls. Thus, demand for loanable funds “tells” the market what the interest rate is, not the other way around.
After re-reading this section, I think you arrive at your conclusion because you are solely focused on the supply-side of loans. A lack of funds has rarely been the driving mechanism for changes in the interest rate.
Any artificial intervention in the interest rate is necessarily the largest market intervention because interest rates are the key to the whole market.
It almost sounds to me like you might be confusing the Federal Reserve’s interest rate setting with interest rates charged by private banks. The Federal Reserve only sets the discount rate, which is the interest rate charged to commercial banks on loans from the Federal Reserve. While the Fed’s rate indirectly influences the bank’s rates, it is not a one-for-one ratio. One needs to consider the demand curve as well.
Again I must point out your inflation fallacies.
Which fallacies?
Let me put it this way. You have in your hand 500 dollars. (...) He has gained enormous wealth by the mere fact he controls monetary policy and the printing press.
There are many problems with this. Who is the banker? The government? Are you suggesting that government investment results in the crowding-out of private investment? Is the government spending all of that money on investment or consumer goods? Or is it paying the wages of millions of employees?
And let us go one step further, since you believe that hyper-inflation is bad (It's correct definition being 50% or more annual inflation), what is the difference between 50% inflation and 12% inflation?
Menu costs. At 50% inflation, store owners are forced to change their prices every week to prevent their stores from losing money. At 12%, stores still “lose” money, but it is a MUCH smaller percentage. At 3%, it’s even smaller yet. Stores still change their prices regularly, but do so more often to adjust to changes in demand than to inflation. For example, a restaurant will rarely raise all prices at once, which one would expect if they were responding to inflation. Rather, they raise the prices on their most popular items.
The real problem with inflation is unexpected inflation (inflation rates that are different, whether more or less, than the expected rate). Unexpected inflation creates uncertainty in markets. When the inflation rate is constant, or varies little, as it does in the US, people input the inflation rate into their decision making process.
I also must ask how do you explain Stagflation? How do you explain 19th Century deflation correlating to the largest growth ever in Human history? How do you explain the 1921 recovery? How come Bernanke, Samuelson, and Krugman pointed to sound fundamentals in 2007 and how come your models could not account for human behavior even a few months before the crash? How come the Austrians did, and have done so in the past? How many times do you have to get it wrong, and Austrians get it right before you start to accept our theories?
I was under the impression that the current view of stagflation is that it occurred when the costs of production were increased by an external force (aka tax or government mandates). The stagflation in the 70’s is seen to result from Nixon’s wage and price controls of 1971.
19th century deflation is not a topic I have ever looked at. A quick search doesn’t point me to what you are talking about. Could you perhaps provide me a link or a specific event so I could look at it?
What would have been the response if Bernanke hadn’t said that? Consider that businesses and stock brokers used to make financial decisions based off of the color of Greenspan’s tie. If Bernanke had said “we’re screwed”, we would have been. Immediately. More so than we are now.
I will watch your movies as well when I have time. (Which will be later today or tomorrow)
Thanks for reading! As usual, I look forward to your thoughts.
Anyways, I look forward to you reading that book and watching those videos. Likewise, after I finish Austrian Perspective to History of Economic Thought, I'll be chalking up my next reading assignment to a work from Samuelson.
U so pimp rothbardian I wanna be like you when I grow up lolololo
Haha Yurebis. Do not flatter. You are doing very well yourself.
Rothbardian, why do you mention Say's law? I mean, I understand that it was an economic law of the past, but do you currently believe that it still holds? Personally, I do not, but I would like to hear your opinion.
On January 29 2010 10:51 Yurebis wrote: Rothbardian you the man.
I think all of this stupid discussion could have been avoided if people weren't so indoctrinated to a statist paradigm where we got to rely on the elitists to tie our shoelaces, to give us food, make the grass grow, etc.
Capitalism, free market isn't a nasty monster that's going to come out from under your bed and eat you, damnit. Capitalism = free people working voluntarily. Anything other than capitalism has to be forced intervention. Be it a democratic government, a dictatorship, communism, whatever it is, if it's not voluntary, guess what, it's central planners telling you what you can or cannot do.
Shit guys, I got the perfect economy solution right here. I do whatever the fuck I want with my money, you do whatever you want with yours, and no one forces the other one to do anything, ok? Can we settle on that or do we have to be perpetually arguing over who has the better plan for everyone else?!? Fuck.
What if I want to use my money to buy a bomb to blow up your business so that my business next door is more profitable?
That would be punished via you paying for the damage you did to anothers property. Not only that, but people would be disinclined to shop at your business. Advocates of Market-Anarchy, or Laissez-Faire radicalism, advocate for this, in the general broadest sense:
This is under the assumption they have such knowledge. Most cases, we, as a population, do not have such knowledge. =/ Problem with Capitalism, we don't have perfect information.
Let us look at a scenario between a doctor and a patient. The patient needs a treatment, and while it may not necessarily be now, it must be sometime. The patient doesn't know how much a surgery will cost, it could cost $10, it could cost $1,000,000, they simply do not know. After all, how could they? Also, they do not necessarily know the quality of such a product. Could this doctor be a good surgeon, or does his patients usually suffer unusually long times of pain? You say the patient might know from the amount of customers, but how would they find out? Do they stand outside the door all day long? Either way, the opportunity cost of searching up such information could be higher than the gain from knowing it, and furthermore, such information might only be attainable under the loss of a substantial amount of money. So, how would the patient decide whether or not to get this surgery? They could move on, but do they know anymore? This lack of perfect information skews the results of the market, and gives much more than "equal" power between consumer and supplier.
The state doesn't have perfect information either... in fact they have a lesser incentive to, because the business to which they attend are not their own, but of others they may never meet or come face to face with.
May I propose that the question should be not "whether you can make the right choices?" but "who has the best incentives to make the right choices?" plus "right choices for who?"
No, the state doesn't, but it will usually have much better information than an individual. Incentives play no role in this as "right choices" are 1. Opinion based, unless you're talking of economically efficient being the right choice, but that completely disregards morality. 2. Relies upon the assumption there are choices available. 3. Relies upon that the option of a "right choice" is available. Which, often times, there isn't. Without perfect information, or at least even DECENT information, no right choice is forseeable.
Now, let us add a new number into my hypothesis above. Suppose the "right amount" or "equilibrium price" was $50,000. How could the patient EVER get to that price if each doctor charges him $500,000+ or nothing, and he doesn't have the information to offer $50,000? How can he argue against the doctors without sufficient medical knowledge?
Wait... who says what the equilibrium price is? IMO there is no equilibrium price (there is no spoon luls).. I think if you're really interested about the aspects of trade you should study uh catallactics.
The state has *no way* of knowing how much *you* value anything because that which you value can only be known after-the-fact, only after you buy something or perhaps even assert your wish to buy something for a certain cost do we know that you value the "something" more than the "cost" (in dollars if it may be)
A trade is made because both parties value the objects being traded differently! Can we agree on <--- that?
Equilibrium price is the price determined by the market given a supply and demand schedule which is the aggregate of people's personal demands and the suppliers personal well, supplies. But fair enough if you do not believe in an equilibrium price. And no, the state really doesn't. That's a problem with it, and the problem with the market is lack of perfect information. Thus, we can't really say one is the best, only that in certain circumstances, one is preferred over another. =/ Yes, I agree with that assumption. Sorry if I'm frustrating you.
Naw it's not frustrating, I like teaching and being taught, that's what we be doing here I hope. Maybe I was too harsh on saying that an equilibrium price doesn't exist. Well it certainly doesn't exist somewhere in reality, like.. objectively. But an equilibrium price would be only an approximation to that which you find other peoples evaluations to be at. Like.. there's no exact price, it's only approximations.. because even at the lowest common denominator, the individual, their values are also constantly changing... so.. there certainly can't be an exact price even if we were all to have our heads scanned and analyzed by some really good keynesian.
I don't see lack of perfect information as a "problem with the market" .. well, it's as much of a problem as "people can't fly" or "move through walls" if you know what I mean.
ZeroJumps, while there is a lot of data in Economics, it is data of the past. Its when economists use the data to fit the theory instead of the theory to fit the data that Economics becomes dangerous. Humans are by nature trained to find patterns even when no patterns exist.
Economics is arguably the most destructive of social sciences.
On January 29 2010 12:11 lixlix wrote: do you not even understand what you yourself write?
sentence one " the poor would just consume it (it referring to aid/handouts) and then be left with nothing again. "
this implies that since they will be left with nothing again, they should not be given aid.
Which is in direct contradiction to your 2nd sentence criticism of "Can't you let the poor decide for themselves whats better for them, anyways?"
Nuh-uh, there's a big difference to what I expect to happen somewhere somewhen given a set of circumstances and what I think they ought to do. I'm saying, if what you want is prosperity to all, stealing from the rich and giving it to the poor is a poor way to making anything sustainable! Alright? I'm sorry if I wasn't clear enough.
What I ought they should do however would be... not to beg their representatives to steal from the rich. I think people ought not to steal. That's as far as prescriptive declarations you'll get from me.
Edit: and by representatives I mean, the state mafia at large.
On January 29 2010 10:51 Yurebis wrote: Rothbardian you the man.
I think all of this stupid discussion could have been avoided if people weren't so indoctrinated to a statist paradigm where we got to rely on the elitists to tie our shoelaces, to give us food, make the grass grow, etc.
Capitalism, free market isn't a nasty monster that's going to come out from under your bed and eat you, damnit. Capitalism = free people working voluntarily. Anything other than capitalism has to be forced intervention. Be it a democratic government, a dictatorship, communism, whatever it is, if it's not voluntary, guess what, it's central planners telling you what you can or cannot do.
Shit guys, I got the perfect economy solution right here. I do whatever the fuck I want with my money, you do whatever you want with yours, and no one forces the other one to do anything, ok? Can we settle on that or do we have to be perpetually arguing over who has the better plan for everyone else?!? Fuck.
What if I want to use my money to buy a bomb to blow up your business so that my business next door is more profitable?
That would be punished via you paying for the damage you did to anothers property. Not only that, but people would be disinclined to shop at your business. Advocates of Market-Anarchy, or Laissez-Faire radicalism, advocate for this, in the general broadest sense:
Of liberty I would say that, in the whole plenitude of its extent, it is unobstructed action according to our will. But rightful liberty is unobstructed action according to our will within limits drawn around us by the equal rights of others. I do not add “within the limits of the law,” because law is often but the tyrant’s will, and always so when it violates the right of an individual. -- Thomas Jefferson
Here again though I find it funny you accuse me of a straw-man when I ask you who had a higher standard of living, the pre or post industrial average man when that is a legitimate Economic question, to you, coming in and denouncing Free-Market voluntaryism on the basis of violation of anothers liberty which is in every case inherently criminal. If that isn't a straw-man I don't know what is. It also belies your bias in the fact you believe that the State produces an egalitarian man, or in the very least can influence a person's behavior. If this was so, merely producing a law proclaiming x activity to be illegal would reduce such activity, but in every case it doesn't. Hence, why Prohibition never worked. You buy into the fallacy of Thomas Hobbes. He has scared you to believe that men are inherently evil, and destructive. This is the biggest load of horse patooty I have ever read. If that was the case then all such Voluntary societies would destroy themselves, yet, even before Hobbes there were Voluntary societies that were peaceful and lasted for hundreds of years. Case in point -- Celtic Ireland, Medieval Iceland (around 1000 to 1300), Colonial Pennsylvania, and in the later years to a very large extent the Old West.
The natural state of man, is peaceful voluntary cooperation. We arrive at such conclusions due to the nature of reason. A man is better off in every sense by peaceful voluntary cooperation rather than violent appropriation in a free society. Is not the inherent predicament of man to be self-interested, and of this highest order of self-interest is preservation of life? We see this borne out in Switzerland who have the least restrictive gun laws of any society, and yet the lowest crime rates. If your hypothesis was correct, and that of Hobbes, the mere presence and ease of acquisition would lead to more crime, more death, and more destruction, yet, the exact opposite is true. How do you account for this discrepancy?
Actually, I'm Chinese and you should call me a Legalist if anything. I'm not even from the same realm of philosophical thought as you. I don't read Hobbes. What I do read is enough history to know that Celtic Ireland was far from nonviolent.
I'm not scared by a guy I've never read. Rather, I've been outside the house enough to see that a law won't prevent x activity unless there's a cop and a jail waiting for the guy who breaks it. The natural state of man is not peaceful voluntary cooperation, hence why man developed laws in the first place. You take an amazing number of leaps in logic to come to your conclusions. Sure is nice to know that you've definitively nailed down the nature of man though.
I find it odd that all these theories rely on vast assumptions about the nature of man. You ever entertained the notion that the nature of man might be debatable? I notice people do this several times in the course of economics. Man is inherently selfish. Man is inherently rational. Man is inherently peaceful and cooperative. Where are all these men you keep hiding? I don't see them in my world. I see a lot of decent, yet flawed, and quite often bone-headed people with a laundry list of insecurities and foibles that lead them to make all kinds of decisions that are not perfectly rational nor inherently selfish.
Again, all I've seen are theories that seem very detached from the reality that's out there. I guess violence is just a byproduct of laws. Without laws, nobody would be violent.
On January 29 2010 12:11 lixlix wrote: do you not even understand what you yourself write?
sentence one " the poor would just consume it (it referring to aid/handouts) and then be left with nothing again. "
this implies that since they will be left with nothing again, they should not be given aid.
Which is in direct contradiction to your 2nd sentence criticism of "Can't you let the poor decide for themselves whats better for them, anyways?"
There is no contradiction. How does one get something given to them? It is either voluntarily through charity, or through the violent appropriation by State agitators. In the latter sense, since our institution of a Republic has limited Democratic principles, it can be said, and as Tocqueville wrote -- Those who realize they can plunder the public trust, will bring ruin upon themselves (I have nonetheless paraphrased and put it into my own words). In essence what is meant is that people will vote to steal from the minority. Once a majority realizes it can vote to forecfully steal from the minority (Welfare) society is doomed to fail, and those who steal have no incentive themselves to produce anything. They are parasites. Leeches.
It is also the old saying about teaching a Man to fish and giving him a fish. What is more moral? Dependancy or independance? What is the only economically sustainable method? Not only do handouts destroy capital and productivity it fosters a naive State-Paternalism which incentivizes sloth and laziness.
It was Benjamin Franklin who said:
"I am for doing good to the poor, but...I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. I observed...that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer."
I love it when people bash capitalism and seem to not be able to fathom how amazingly high the standard of living has increased across the world. Poor people still exist, but more people have a higher standard of living than could be dreamed of 100 years ago.
Being against economic individualism (capitalism is a derogatory name coined by Marx) is not a new idea, nor has it ever been a practical one that made for good policy.
"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design." - F.A. Hayek The Fatal Conceit
On January 29 2010 10:51 Yurebis wrote: Rothbardian you the man.
I think all of this stupid discussion could have been avoided if people weren't so indoctrinated to a statist paradigm where we got to rely on the elitists to tie our shoelaces, to give us food, make the grass grow, etc.
Capitalism, free market isn't a nasty monster that's going to come out from under your bed and eat you, damnit. Capitalism = free people working voluntarily. Anything other than capitalism has to be forced intervention. Be it a democratic government, a dictatorship, communism, whatever it is, if it's not voluntary, guess what, it's central planners telling you what you can or cannot do.
Shit guys, I got the perfect economy solution right here. I do whatever the fuck I want with my money, you do whatever you want with yours, and no one forces the other one to do anything, ok? Can we settle on that or do we have to be perpetually arguing over who has the better plan for everyone else?!? Fuck.
What if I want to use my money to buy a bomb to blow up your business so that my business next door is more profitable?
That would be punished via you paying for the damage you did to anothers property. Not only that, but people would be disinclined to shop at your business. Advocates of Market-Anarchy, or Laissez-Faire radicalism, advocate for this, in the general broadest sense:
This is under the assumption they have such knowledge. Most cases, we, as a population, do not have such knowledge. =/ Problem with Capitalism, we don't have perfect information.
Let us look at a scenario between a doctor and a patient. The patient needs a treatment, and while it may not necessarily be now, it must be sometime. The patient doesn't know how much a surgery will cost, it could cost $10, it could cost $1,000,000, they simply do not know. After all, how could they? Also, they do not necessarily know the quality of such a product. Could this doctor be a good surgeon, or does his patients usually suffer unusually long times of pain? You say the patient might know from the amount of customers, but how would they find out? Do they stand outside the door all day long? Either way, the opportunity cost of searching up such information could be higher than the gain from knowing it, and furthermore, such information might only be attainable under the loss of a substantial amount of money. So, how would the patient decide whether or not to get this surgery? They could move on, but do they know anymore? This lack of perfect information skews the results of the market, and gives much more than "equal" power between consumer and supplier.
The state doesn't have perfect information either... in fact they have a lesser incentive to, because the business to which they attend are not their own, but of others they may never meet or come face to face with.
May I propose that the question should be not "whether you can make the right choices?" but "who has the best incentives to make the right choices?" plus "right choices for who?"
No, the state doesn't, but it will usually have much better information than an individual. Incentives play no role in this as "right choices" are 1. Opinion based, unless you're talking of economically efficient being the right choice, but that completely disregards morality. 2. Relies upon the assumption there are choices available. 3. Relies upon that the option of a "right choice" is available. Which, often times, there isn't. Without perfect information, or at least even DECENT information, no right choice is forseeable.
Now, let us add a new number into my hypothesis above. Suppose the "right amount" or "equilibrium price" was $50,000. How could the patient EVER get to that price if each doctor charges him $500,000+ or nothing, and he doesn't have the information to offer $50,000? How can he argue against the doctors without sufficient medical knowledge?
Wait... who says what the equilibrium price is? IMO there is no equilibrium price (there is no spoon luls).. I think if you're really interested about the aspects of trade you should study uh catallactics.
The state has *no way* of knowing how much *you* value anything because that which you value can only be known after-the-fact, only after you buy something or perhaps even assert your wish to buy something for a certain cost do we know that you value the "something" more than the "cost" (in dollars if it may be)
A trade is made because both parties value the objects being traded differently! Can we agree on <--- that?
Equilibrium price is the price determined by the market given a supply and demand schedule which is the aggregate of people's personal demands and the suppliers personal well, supplies. But fair enough if you do not believe in an equilibrium price. And no, the state really doesn't. That's a problem with it, and the problem with the market is lack of perfect information. Thus, we can't really say one is the best, only that in certain circumstances, one is preferred over another. =/ Yes, I agree with that assumption. Sorry if I'm frustrating you.
Naw it's not frustrating, I like teaching and being taught, that's what we be doing here I hope. Maybe I was too harsh on saying that an equilibrium price doesn't exist. Well it certainly doesn't exist somewhere in reality, like.. objectively. But an equilibrium price would be only an approximation to that which you find other peoples evaluations to be at. Like.. there's no exact price, it's only approximations.. because even at the lowest common denominator, the individual, their values are also constantly changing... so.. there certainly can't be an exact price even if we were all to have our heads scanned and analyzed by some really good keynesian.
I don't see lack of perfect information as a "problem with the market" .. well, it's as much of a problem as "people can't fly" or "move through walls" if you know what I mean.
Haha, that's very true. It is very interesting to learn through conversation and civil debate. ^_^ That point, I agree on. An equilibrium price, as far as I'm concerned, is an ideal. Much like infinity,you can get the idea, but to reach it is incredibly difficult. Nonetheless, to have the idea there as an indicator is still useful, much like how the concept of infinity is useful in mathematics.
Hmm, well, I highly disagree on that point. =/ See, the market works because there is a struggle between two forces, both of which are trying to do the best for their own good, to make a mutually beneficial choice. I think of it much like a court room, where two sides battle it out to find the truth of the matter. However, if one side suddenly doesn't have a crucial witness, or piece of information, the system falls apart. =(
There is always an equilibrium price but this equilibrium price is constantly shifting and often extremely difficult to know. The market price can be extremely far away from the equilibrium price for a very long time due to inefficiencies, information lag, etc...
On January 29 2010 10:51 Yurebis wrote: Rothbardian you the man.
I think all of this stupid discussion could have been avoided if people weren't so indoctrinated to a statist paradigm where we got to rely on the elitists to tie our shoelaces, to give us food, make the grass grow, etc.
Capitalism, free market isn't a nasty monster that's going to come out from under your bed and eat you, damnit. Capitalism = free people working voluntarily. Anything other than capitalism has to be forced intervention. Be it a democratic government, a dictatorship, communism, whatever it is, if it's not voluntary, guess what, it's central planners telling you what you can or cannot do.
Shit guys, I got the perfect economy solution right here. I do whatever the fuck I want with my money, you do whatever you want with yours, and no one forces the other one to do anything, ok? Can we settle on that or do we have to be perpetually arguing over who has the better plan for everyone else?!? Fuck.
What if I want to use my money to buy a bomb to blow up your business so that my business next door is more profitable?
That would be punished via you paying for the damage you did to anothers property. Not only that, but people would be disinclined to shop at your business. Advocates of Market-Anarchy, or Laissez-Faire radicalism, advocate for this, in the general broadest sense:
Of liberty I would say that, in the whole plenitude of its extent, it is unobstructed action according to our will. But rightful liberty is unobstructed action according to our will within limits drawn around us by the equal rights of others. I do not add “within the limits of the law,” because law is often but the tyrant’s will, and always so when it violates the right of an individual. -- Thomas Jefferson
Here again though I find it funny you accuse me of a straw-man when I ask you who had a higher standard of living, the pre or post industrial average man when that is a legitimate Economic question, to you, coming in and denouncing Free-Market voluntaryism on the basis of violation of anothers liberty which is in every case inherently criminal. If that isn't a straw-man I don't know what is. It also belies your bias in the fact you believe that the State produces an egalitarian man, or in the very least can influence a person's behavior. If this was so, merely producing a law proclaiming x activity to be illegal would reduce such activity, but in every case it doesn't. Hence, why Prohibition never worked. You buy into the fallacy of Thomas Hobbes. He has scared you to believe that men are inherently evil, and destructive. This is the biggest load of horse patooty I have ever read. If that was the case then all such Voluntary societies would destroy themselves, yet, even before Hobbes there were Voluntary societies that were peaceful and lasted for hundreds of years. Case in point -- Celtic Ireland, Medieval Iceland (around 1000 to 1300), Colonial Pennsylvania, and in the later years to a very large extent the Old West.
The natural state of man, is peaceful voluntary cooperation. We arrive at such conclusions due to the nature of reason. A man is better off in every sense by peaceful voluntary cooperation rather than violent appropriation in a free society. Is not the inherent predicament of man to be self-interested, and of this highest order of self-interest is preservation of life? We see this borne out in Switzerland who have the least restrictive gun laws of any society, and yet the lowest crime rates. If your hypothesis was correct, and that of Hobbes, the mere presence and ease of acquisition would lead to more crime, more death, and more destruction, yet, the exact opposite is true. How do you account for this discrepancy?
Actually, I'm Chinese and you should call me a Legalist if anything. I'm not even from the same realm of philosophical thought as you. I don't read Hobbes. What I do read is enough history to know that Celtic Ireland was far from nonviolent.
I'm not scared by a guy I've never read. Rather, I've been outside the house enough to see that a law won't prevent x activity unless there's a cop and a jail waiting for the guy who breaks it. The natural state of man is not peaceful voluntary cooperation, hence why man developed laws in the first place. You take an amazing number of leaps in logic to come to your conclusions. Sure is nice to know that you've definitively nailed down the nature of man though.
I find it odd that all these theories rely on vast assumptions about the nature of man. You ever entertained the notion that the nature of man might be debatable? I notice people do this several times in the course of economics. Man is inherently selfish. Man is inherently rational. Man is inherently peaceful and cooperative. Where are all these men you keep hiding? I don't see them in my world. I see a lot of decent, yet flawed, and quite often bone-headed people with a laundry list of insecurities and foibles that lead them to make all kinds of decisions that are not perfectly rational nor inherently selfish.
Again, all I've seen are theories that seem very detached from the reality that's out there. I guess violence is just a byproduct of laws. Without laws, nobody would be violent.
We call that Moral Hazard and that is a product of the State. Secondly, there will always be crime, for the sole reason that humans have free will. We recognize this fact, and have property rights written down and codified so as to create a common link and understanding in society. No where did I say Celtic Ireland was non-violent, or that crime would disappear. On the contrary. Celtic Ireland was as advanced a society as any other Western Nation-State, yet, they were wholly voluntary and Stateless. Your theory cannot account for this. For if it could, it would contradict your beliefs, yet you still hold fast that a monopoly must be for the safety and security of society.
Apparently, you have skipped over the history of Tuath's and Land Associations. They were private law societies.
On January 29 2010 12:20 0neder wrote: I love it when people bash capitalism and seem to not be able to fathom how amazingly high the standard of living has increased across the world. Poor people still exist, but more people have a higher standard of living than could be dreamed of 100 years ago.
Being against economic individualism (capitalism is a derogatory name coined by Marx) is not a new idea, nor has it ever been a practical one that made for good policy.
"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design." - F.A. Hayek The Fatal Conceit
I love it when people don't read the thread then want to quote basic one-liners about how great capitalism is. The world needs all types though. Cheers!
On January 29 2010 10:51 Yurebis wrote: Rothbardian you the man.
I think all of this stupid discussion could have been avoided if people weren't so indoctrinated to a statist paradigm where we got to rely on the elitists to tie our shoelaces, to give us food, make the grass grow, etc.
Capitalism, free market isn't a nasty monster that's going to come out from under your bed and eat you, damnit. Capitalism = free people working voluntarily. Anything other than capitalism has to be forced intervention. Be it a democratic government, a dictatorship, communism, whatever it is, if it's not voluntary, guess what, it's central planners telling you what you can or cannot do.
Shit guys, I got the perfect economy solution right here. I do whatever the fuck I want with my money, you do whatever you want with yours, and no one forces the other one to do anything, ok? Can we settle on that or do we have to be perpetually arguing over who has the better plan for everyone else?!? Fuck.
What if I want to use my money to buy a bomb to blow up your business so that my business next door is more profitable?
That would be punished via you paying for the damage you did to anothers property. Not only that, but people would be disinclined to shop at your business. Advocates of Market-Anarchy, or Laissez-Faire radicalism, advocate for this, in the general broadest sense:
This is under the assumption they have such knowledge. Most cases, we, as a population, do not have such knowledge. =/ Problem with Capitalism, we don't have perfect information.
Let us look at a scenario between a doctor and a patient. The patient needs a treatment, and while it may not necessarily be now, it must be sometime. The patient doesn't know how much a surgery will cost, it could cost $10, it could cost $1,000,000, they simply do not know. After all, how could they? Also, they do not necessarily know the quality of such a product. Could this doctor be a good surgeon, or does his patients usually suffer unusually long times of pain? You say the patient might know from the amount of customers, but how would they find out? Do they stand outside the door all day long? Either way, the opportunity cost of searching up such information could be higher than the gain from knowing it, and furthermore, such information might only be attainable under the loss of a substantial amount of money. So, how would the patient decide whether or not to get this surgery? They could move on, but do they know anymore? This lack of perfect information skews the results of the market, and gives much more than "equal" power between consumer and supplier.
The state doesn't have perfect information either... in fact they have a lesser incentive to, because the business to which they attend are not their own, but of others they may never meet or come face to face with.
May I propose that the question should be not "whether you can make the right choices?" but "who has the best incentives to make the right choices?" plus "right choices for who?"
No, the state doesn't, but it will usually have much better information than an individual. Incentives play no role in this as "right choices" are 1. Opinion based, unless you're talking of economically efficient being the right choice, but that completely disregards morality. 2. Relies upon the assumption there are choices available. 3. Relies upon that the option of a "right choice" is available. Which, often times, there isn't. Without perfect information, or at least even DECENT information, no right choice is forseeable.
Now, let us add a new number into my hypothesis above. Suppose the "right amount" or "equilibrium price" was $50,000. How could the patient EVER get to that price if each doctor charges him $500,000+ or nothing, and he doesn't have the information to offer $50,000? How can he argue against the doctors without sufficient medical knowledge?
Wait... who says what the equilibrium price is? IMO there is no equilibrium price (there is no spoon luls).. I think if you're really interested about the aspects of trade you should study uh catallactics.
The state has *no way* of knowing how much *you* value anything because that which you value can only be known after-the-fact, only after you buy something or perhaps even assert your wish to buy something for a certain cost do we know that you value the "something" more than the "cost" (in dollars if it may be)
A trade is made because both parties value the objects being traded differently! Can we agree on <--- that?
Equilibrium price is the price determined by the market given a supply and demand schedule which is the aggregate of people's personal demands and the suppliers personal well, supplies. But fair enough if you do not believe in an equilibrium price. And no, the state really doesn't. That's a problem with it, and the problem with the market is lack of perfect information. Thus, we can't really say one is the best, only that in certain circumstances, one is preferred over another. =/ Yes, I agree with that assumption. Sorry if I'm frustrating you.
Naw it's not frustrating, I like teaching and being taught, that's what we be doing here I hope. Maybe I was too harsh on saying that an equilibrium price doesn't exist. Well it certainly doesn't exist somewhere in reality, like.. objectively. But an equilibrium price would be only an approximation to that which you find other peoples evaluations to be at. Like.. there's no exact price, it's only approximations.. because even at the lowest common denominator, the individual, their values are also constantly changing... so.. there certainly can't be an exact price even if we were all to have our heads scanned and analyzed by some really good keynesian.
I don't see lack of perfect information as a "problem with the market" .. well, it's as much of a problem as "people can't fly" or "move through walls" if you know what I mean.
Haha, that's very true. It is very interesting to learn through conversation and civil debate. ^_^ That point, I agree on. An equilibrium price, as far as I'm concerned, is an ideal. Much like infinity,you can get the idea, but to reach it is incredibly difficult. Nonetheless, to have the idea there as an indicator is still useful, much like how the concept of infinity is useful in mathematics.
Hmm, well, I highly disagree on that point. =/ See, the market works because there is a struggle between two forces, both of which are trying to do the best for their own good, to make a mutually beneficial choice. I think of it much like a court room, where two sides battle it out to find the truth of the matter. However, if one side suddenly doesn't have a crucial witness, or piece of information, the system falls apart. =(
Define "fall apart". Certainly one would come up on top in that case but the fact that there was a conference in the first place shows you that these people were willing to engage in their dispute civilly and adhere to the jury or judge's decision!
I don't understand how can you go through 11 pages of critizicing the system that made the United States on of the 5 most powerful countries in the world in less than 100 years.
On January 29 2010 12:21 lixlix wrote: There is always an equilibrium price but this equilibrium price is constantly shifting and often extremely difficult to know. The market price can be extremely far away from the equilibrium price for a very long time due to inefficiencies, information lag, etc...
But if you don't know the equilibrium price apart from the market price, how can you say that the market price was wrong? You don't know the equilibrium price, it's also a subjective approximation! Is what you mean this.. "I think such product is too expensive/too cheap"?
Edit: "market price was wrong", not the equilibrium price.
On January 29 2010 10:55 StorkHwaiting wrote: [quote]
What if I want to use my money to buy a bomb to blow up your business so that my business next door is more profitable?
That would be punished via you paying for the damage you did to anothers property. Not only that, but people would be disinclined to shop at your business. Advocates of Market-Anarchy, or Laissez-Faire radicalism, advocate for this, in the general broadest sense:
This is under the assumption they have such knowledge. Most cases, we, as a population, do not have such knowledge. =/ Problem with Capitalism, we don't have perfect information.
Let us look at a scenario between a doctor and a patient. The patient needs a treatment, and while it may not necessarily be now, it must be sometime. The patient doesn't know how much a surgery will cost, it could cost $10, it could cost $1,000,000, they simply do not know. After all, how could they? Also, they do not necessarily know the quality of such a product. Could this doctor be a good surgeon, or does his patients usually suffer unusually long times of pain? You say the patient might know from the amount of customers, but how would they find out? Do they stand outside the door all day long? Either way, the opportunity cost of searching up such information could be higher than the gain from knowing it, and furthermore, such information might only be attainable under the loss of a substantial amount of money. So, how would the patient decide whether or not to get this surgery? They could move on, but do they know anymore? This lack of perfect information skews the results of the market, and gives much more than "equal" power between consumer and supplier.
The state doesn't have perfect information either... in fact they have a lesser incentive to, because the business to which they attend are not their own, but of others they may never meet or come face to face with.
May I propose that the question should be not "whether you can make the right choices?" but "who has the best incentives to make the right choices?" plus "right choices for who?"
No, the state doesn't, but it will usually have much better information than an individual. Incentives play no role in this as "right choices" are 1. Opinion based, unless you're talking of economically efficient being the right choice, but that completely disregards morality. 2. Relies upon the assumption there are choices available. 3. Relies upon that the option of a "right choice" is available. Which, often times, there isn't. Without perfect information, or at least even DECENT information, no right choice is forseeable.
Now, let us add a new number into my hypothesis above. Suppose the "right amount" or "equilibrium price" was $50,000. How could the patient EVER get to that price if each doctor charges him $500,000+ or nothing, and he doesn't have the information to offer $50,000? How can he argue against the doctors without sufficient medical knowledge?
Wait... who says what the equilibrium price is? IMO there is no equilibrium price (there is no spoon luls).. I think if you're really interested about the aspects of trade you should study uh catallactics.
The state has *no way* of knowing how much *you* value anything because that which you value can only be known after-the-fact, only after you buy something or perhaps even assert your wish to buy something for a certain cost do we know that you value the "something" more than the "cost" (in dollars if it may be)
A trade is made because both parties value the objects being traded differently! Can we agree on <--- that?
Equilibrium price is the price determined by the market given a supply and demand schedule which is the aggregate of people's personal demands and the suppliers personal well, supplies. But fair enough if you do not believe in an equilibrium price. And no, the state really doesn't. That's a problem with it, and the problem with the market is lack of perfect information. Thus, we can't really say one is the best, only that in certain circumstances, one is preferred over another. =/ Yes, I agree with that assumption. Sorry if I'm frustrating you.
Naw it's not frustrating, I like teaching and being taught, that's what we be doing here I hope. Maybe I was too harsh on saying that an equilibrium price doesn't exist. Well it certainly doesn't exist somewhere in reality, like.. objectively. But an equilibrium price would be only an approximation to that which you find other peoples evaluations to be at. Like.. there's no exact price, it's only approximations.. because even at the lowest common denominator, the individual, their values are also constantly changing... so.. there certainly can't be an exact price even if we were all to have our heads scanned and analyzed by some really good keynesian.
I don't see lack of perfect information as a "problem with the market" .. well, it's as much of a problem as "people can't fly" or "move through walls" if you know what I mean.
Haha, that's very true. It is very interesting to learn through conversation and civil debate. ^_^ That point, I agree on. An equilibrium price, as far as I'm concerned, is an ideal. Much like infinity,you can get the idea, but to reach it is incredibly difficult. Nonetheless, to have the idea there as an indicator is still useful, much like how the concept of infinity is useful in mathematics.
Hmm, well, I highly disagree on that point. =/ See, the market works because there is a struggle between two forces, both of which are trying to do the best for their own good, to make a mutually beneficial choice. I think of it much like a court room, where two sides battle it out to find the truth of the matter. However, if one side suddenly doesn't have a crucial witness, or piece of information, the system falls apart. =(
Define "fall apart". Certainly one would come up on top in that case but the fact that there was a conference in the first place shows you that these people were willing to engage in their dispute civilly and adhere to the jury or judge's decision!
Well, by fall apart, I meant that the point of the trial failed. Sure, something the trial happened, but see, that's not the point of the trial. The point of the trial is to find the truth, to make sure justice comes out on top. However, with insufficient information, we do not know whether or not the correct verdict was chosen.
Also, Moral Hazard applies to everything, not just the state. It is not, by definition, caused by the state. In fact, it applies to people as well. If you get insurance, you're more likely to drive more recklessly. =/ Stuff like that.
Let's not debate the calculation problem. The Austrians had this debate with Central Economic Planners for nigh 30 years, and while we won the debate in actuality, in the world, the Planners achieved victory and as we can see the horrendous effects of their victory. I am hopeful though for a new Austrian/Market revolution when the house of cards finally crumbles in the coming years.
Free-Banking, 100% Reserve Banking, and a Commodity-Currency with no fixed exchange rates. I would also prefer Hayek's De-Nationalization of Currency, which is a part of Free-Banking. Anyone is free to produce their own currency. Competition will arrive at the strongest currency, which is the best for all of us.
What's all this talk about "theoretical equilibrium price" -- there is none. Practitioners never talk about how much something "ought" to be. If the market is buying and selling at a certain price, THAT is where the price "ought" to be, the transient equilibrium price where supply meets demand.
Just look at a market price ladder with all the bids and offers stacked up. Then you realize many things about equilibrium. Those who ask for too much, don't get a trade. Those who bid too little, don't get a trade. If you want to buy, you have to match your desire to get a good price with the desire for sellers to also get a good price. The market has the final say.
On January 29 2010 12:26 proberecall wrote: I don't understand how can you go through 11 pages of critizicing the system that made the United States on of the 5 most powerful countries in the world in less than 100 years.
when i make a sandwich, i go against the grain and use roma tomatos instead of the standard Hot House brand.
On January 29 2010 12:34 StRyKeR wrote: What's all this talk about "theoretical equilibrium price" -- there is none. Practitioners never talk about how much something "ought" to be. If the market is buying and selling at a certain price, THAT is where the price "ought" to be, the transient equilibrium price where supply meets demand.
Just look at a market price ladder with all the bids and offers stacked up. Then you realize many things about equilibrium. Those who ask for too much, don't get a trade. Those who bid too little, don't get a trade. If you want to buy, you have to match your desire to get a good price with the desire for sellers to also get a good price. The market has the final say.
i've been trying to buy KLA at 0.065 for the past 3 days with no success!
and it's been sitting at 0.065 for the most part! (well, half the time)
On January 29 2010 12:21 lixlix wrote: There is always an equilibrium price but this equilibrium price is constantly shifting and often extremely difficult to know. The market price can be extremely far away from the equilibrium price for a very long time due to inefficiencies, information lag, etc...
But if you don't know the equilibrium price apart from the market price, how can you say that the market price was wrong? You don't know the equilibrium price, it's also a subjective approximation! Is what you mean this.. "I think such product is too expensive/too cheap"?
Edit: "market price was wrong", not the equilibrium price.
people seem to be attributing a lot of things to me when I haven't said anything.
When did I say the market price is wrong? what does that even mean? the market price is wrong? Define wrong. I have no idea what you are talking about.
As to my criticism of your contradictory statement, never did I advocate handing out aid to the poor, but I criticize your statement that "not handing out aid is equivalent to letting the poor decide for themselves."
Teaching a man to fish is superior to giving him a fish. Nobody is denying that. Teaching a man to fish is a form of aid.
All the people who are sitting at the bid and offer thinking they have the right valuation for where the stock is going to go is taking a risk. That's what people do. The system doesn't "fall apart" because someone has more information! If someone is sure that the stock is going up, he's gonna start buying up all the offers, probably moving the stock price up a couple of ticks. Does this mean that the market failed? What exactly "failed" in this trial? People who took a risk thinking that the stock will fall ended up trading for a loss because they didn't have enough information.
The market is a system that rewards competition and the flow of information. Whoever has more information faster wins. Fast information and high competition is good for the market. In order for the price of a market to accurately reflect its value, people need to do hard work to take risks buying or selling.
On January 29 2010 11:09 Rothbardian wrote: [quote]
That would be punished via you paying for the damage you did to anothers property. Not only that, but people would be disinclined to shop at your business. Advocates of Market-Anarchy, or Laissez-Faire radicalism, advocate for this, in the general broadest sense:
This is under the assumption they have such knowledge. Most cases, we, as a population, do not have such knowledge. =/ Problem with Capitalism, we don't have perfect information.
Let us look at a scenario between a doctor and a patient. The patient needs a treatment, and while it may not necessarily be now, it must be sometime. The patient doesn't know how much a surgery will cost, it could cost $10, it could cost $1,000,000, they simply do not know. After all, how could they? Also, they do not necessarily know the quality of such a product. Could this doctor be a good surgeon, or does his patients usually suffer unusually long times of pain? You say the patient might know from the amount of customers, but how would they find out? Do they stand outside the door all day long? Either way, the opportunity cost of searching up such information could be higher than the gain from knowing it, and furthermore, such information might only be attainable under the loss of a substantial amount of money. So, how would the patient decide whether or not to get this surgery? They could move on, but do they know anymore? This lack of perfect information skews the results of the market, and gives much more than "equal" power between consumer and supplier.
The state doesn't have perfect information either... in fact they have a lesser incentive to, because the business to which they attend are not their own, but of others they may never meet or come face to face with.
May I propose that the question should be not "whether you can make the right choices?" but "who has the best incentives to make the right choices?" plus "right choices for who?"
No, the state doesn't, but it will usually have much better information than an individual. Incentives play no role in this as "right choices" are 1. Opinion based, unless you're talking of economically efficient being the right choice, but that completely disregards morality. 2. Relies upon the assumption there are choices available. 3. Relies upon that the option of a "right choice" is available. Which, often times, there isn't. Without perfect information, or at least even DECENT information, no right choice is forseeable.
Now, let us add a new number into my hypothesis above. Suppose the "right amount" or "equilibrium price" was $50,000. How could the patient EVER get to that price if each doctor charges him $500,000+ or nothing, and he doesn't have the information to offer $50,000? How can he argue against the doctors without sufficient medical knowledge?
Wait... who says what the equilibrium price is? IMO there is no equilibrium price (there is no spoon luls).. I think if you're really interested about the aspects of trade you should study uh catallactics.
The state has *no way* of knowing how much *you* value anything because that which you value can only be known after-the-fact, only after you buy something or perhaps even assert your wish to buy something for a certain cost do we know that you value the "something" more than the "cost" (in dollars if it may be)
A trade is made because both parties value the objects being traded differently! Can we agree on <--- that?
Equilibrium price is the price determined by the market given a supply and demand schedule which is the aggregate of people's personal demands and the suppliers personal well, supplies. But fair enough if you do not believe in an equilibrium price. And no, the state really doesn't. That's a problem with it, and the problem with the market is lack of perfect information. Thus, we can't really say one is the best, only that in certain circumstances, one is preferred over another. =/ Yes, I agree with that assumption. Sorry if I'm frustrating you.
Naw it's not frustrating, I like teaching and being taught, that's what we be doing here I hope. Maybe I was too harsh on saying that an equilibrium price doesn't exist. Well it certainly doesn't exist somewhere in reality, like.. objectively. But an equilibrium price would be only an approximation to that which you find other peoples evaluations to be at. Like.. there's no exact price, it's only approximations.. because even at the lowest common denominator, the individual, their values are also constantly changing... so.. there certainly can't be an exact price even if we were all to have our heads scanned and analyzed by some really good keynesian.
I don't see lack of perfect information as a "problem with the market" .. well, it's as much of a problem as "people can't fly" or "move through walls" if you know what I mean.
Haha, that's very true. It is very interesting to learn through conversation and civil debate. ^_^ That point, I agree on. An equilibrium price, as far as I'm concerned, is an ideal. Much like infinity,you can get the idea, but to reach it is incredibly difficult. Nonetheless, to have the idea there as an indicator is still useful, much like how the concept of infinity is useful in mathematics.
Hmm, well, I highly disagree on that point. =/ See, the market works because there is a struggle between two forces, both of which are trying to do the best for their own good, to make a mutually beneficial choice. I think of it much like a court room, where two sides battle it out to find the truth of the matter. However, if one side suddenly doesn't have a crucial witness, or piece of information, the system falls apart. =(
Define "fall apart". Certainly one would come up on top in that case but the fact that there was a conference in the first place shows you that these people were willing to engage in their dispute civilly and adhere to the jury or judge's decision!
Well, by fall apart, I meant that the point of the trial failed. Sure, something the trial happened, but see, that's not the point of the trial. The point of the trial is to find the truth, to make sure justice comes out on top. However, with insufficient information, we do not know whether or not the correct verdict was chosen.
Also, Moral Hazard applies to everything, not just the state. It is not, by definition, caused by the state. In fact, it applies to people as well. If you get insurance, you're more likely to drive more recklessly. =/ Stuff like that.
Hmm... the point of the trial was to find the truth? Maybe for the verdict.. but past that, it also comes down to what the sentence should be, those being gray areas of punishment and retribution.. There is no truth to be sought at that point (unless you're a very hardcore moral objectivist) but really, only disputes to be settled in a way thats good for the court's clients, some ruling that they abide by and approve of. That's not being limited to the prosecution and the defense but also any future clients. edit: forgot to quote
On January 29 2010 10:51 Yurebis wrote: Rothbardian you the man.
I think all of this stupid discussion could have been avoided if people weren't so indoctrinated to a statist paradigm where we got to rely on the elitists to tie our shoelaces, to give us food, make the grass grow, etc.
Capitalism, free market isn't a nasty monster that's going to come out from under your bed and eat you, damnit. Capitalism = free people working voluntarily. Anything other than capitalism has to be forced intervention. Be it a democratic government, a dictatorship, communism, whatever it is, if it's not voluntary, guess what, it's central planners telling you what you can or cannot do.
Shit guys, I got the perfect economy solution right here. I do whatever the fuck I want with my money, you do whatever you want with yours, and no one forces the other one to do anything, ok? Can we settle on that or do we have to be perpetually arguing over who has the better plan for everyone else?!? Fuck.
What if I want to use my money to buy a bomb to blow up your business so that my business next door is more profitable?
That would be punished via you paying for the damage you did to anothers property. Not only that, but people would be disinclined to shop at your business. Advocates of Market-Anarchy, or Laissez-Faire radicalism, advocate for this, in the general broadest sense:
Of liberty I would say that, in the whole plenitude of its extent, it is unobstructed action according to our will. But rightful liberty is unobstructed action according to our will within limits drawn around us by the equal rights of others. I do not add “within the limits of the law,” because law is often but the tyrant’s will, and always so when it violates the right of an individual. -- Thomas Jefferson
Here again though I find it funny you accuse me of a straw-man when I ask you who had a higher standard of living, the pre or post industrial average man when that is a legitimate Economic question, to you, coming in and denouncing Free-Market voluntaryism on the basis of violation of anothers liberty which is in every case inherently criminal. If that isn't a straw-man I don't know what is. It also belies your bias in the fact you believe that the State produces an egalitarian man, or in the very least can influence a person's behavior. If this was so, merely producing a law proclaiming x activity to be illegal would reduce such activity, but in every case it doesn't. Hence, why Prohibition never worked. You buy into the fallacy of Thomas Hobbes. He has scared you to believe that men are inherently evil, and destructive. This is the biggest load of horse patooty I have ever read. If that was the case then all such Voluntary societies would destroy themselves, yet, even before Hobbes there were Voluntary societies that were peaceful and lasted for hundreds of years. Case in point -- Celtic Ireland, Medieval Iceland (around 1000 to 1300), Colonial Pennsylvania, and in the later years to a very large extent the Old West.
The natural state of man, is peaceful voluntary cooperation. We arrive at such conclusions due to the nature of reason. A man is better off in every sense by peaceful voluntary cooperation rather than violent appropriation in a free society. Is not the inherent predicament of man to be self-interested, and of this highest order of self-interest is preservation of life? We see this borne out in Switzerland who have the least restrictive gun laws of any society, and yet the lowest crime rates. If your hypothesis was correct, and that of Hobbes, the mere presence and ease of acquisition would lead to more crime, more death, and more destruction, yet, the exact opposite is true. How do you account for this discrepancy?
Actually, I'm Chinese and you should call me a Legalist if anything. I'm not even from the same realm of philosophical thought as you. I don't read Hobbes. What I do read is enough history to know that Celtic Ireland was far from nonviolent.
I'm not scared by a guy I've never read. Rather, I've been outside the house enough to see that a law won't prevent x activity unless there's a cop and a jail waiting for the guy who breaks it. The natural state of man is not peaceful voluntary cooperation, hence why man developed laws in the first place. You take an amazing number of leaps in logic to come to your conclusions. Sure is nice to know that you've definitively nailed down the nature of man though.
I find it odd that all these theories rely on vast assumptions about the nature of man. You ever entertained the notion that the nature of man might be debatable? I notice people do this several times in the course of economics. Man is inherently selfish. Man is inherently rational. Man is inherently peaceful and cooperative. Where are all these men you keep hiding? I don't see them in my world. I see a lot of decent, yet flawed, and quite often bone-headed people with a laundry list of insecurities and foibles that lead them to make all kinds of decisions that are not perfectly rational nor inherently selfish.
Again, all I've seen are theories that seem very detached from the reality that's out there. I guess violence is just a byproduct of laws. Without laws, nobody would be violent.
We call that Moral Hazard and that is a product of the State. Secondly, there will always be crime, for the sole reason that humans have free will. We recognize this fact, and have property rights written down and codified so as to create a common link and understanding in society. No where did I say Celtic Ireland was non-violent, or that crime would disappear. On the contrary. Celtic Ireland was as advanced a society as any other Western Nation-State, yet, they were wholly voluntary and Stateless. Your theory cannot account for this. For if it could, it would contradict your beliefs, yet you still hold fast that a monopoly must be for the safety and security of society.
Apparently, you have skipped over the history of Tuath's and Land Associations. They were private law societies.
So humans are naturally peaceful and cooperative, yet you turn around and say if humans have choice they will commit crimes for the sole reason that they have choice. That doesn't make sense.
Even so, moving on, you say that you recognize criminal activity will exist. Yet, recognizing something and writing it down on paper is not an adequate solution for how to stop said person from engaging in anti-social behavior. You've provided no answer. I'm pretty sure society understands when someone's committed a crime and usually don't need a piece of paper to tell them it's fucked up to steal someone's chicken.
As an aside, I have to ask you to please stop with the annoying ass extrapolations you keep trying to make about who I am and what I believe. First you accuse me of following Hobbes. Then you accuse me of having a theory. I don't have a theory. I have a brain. I think like an individual, not some creepy cultist who continually refers to himself as "we" and can only see the world in terms of theories or schools of thought. I'd rather you just have a conversation, rather than try to fit everything you see into some kind of box.
On January 29 2010 12:21 lixlix wrote: There is always an equilibrium price but this equilibrium price is constantly shifting and often extremely difficult to know. The market price can be extremely far away from the equilibrium price for a very long time due to inefficiencies, information lag, etc...
But if you don't know the equilibrium price apart from the market price, how can you say that the market price was wrong? You don't know the equilibrium price, it's also a subjective approximation! Is what you mean this.. "I think such product is too expensive/too cheap"?
Edit: "market price was wrong", not the equilibrium price.
people seem to be attributing a lot of things to me when I haven't said anything.
When did I say the market price is wrong? what does that even mean? the market price is wrong? Define wrong. I have no idea what you are talking about.
As to my criticism of your contradictory statement, never did I advocate handing out aid to the poor, but I criticize your statement that "not handing out aid is equivalent to letting the poor decide for themselves."
Teaching a man to fish is superior to giving him a fish. Nobody is denying that. Teaching a man to fish is a form of aid.
I can imagine a system in which a third party definitively says "Here are the prices. We did the research. This is the fair value." Well, maybe they're wrong. People will buy from them and sell at a higher price. Then the third party realizes this mistake and corrects it. But then they get picked off again. The end result is the exact system we have right now, where people disagreeing on the price of a product will buy and sell. You can never correctly judge fair value, not only because you don't have full information about the present, but because you don't have information about the future.
Let's say you're in the car trading business. You buy up used cars and sell them to other people. You might know that a car right now has a value of exactly 10,000 dollars. But you sure as hell won't buy or sell at 10,000. You want to make sure you're making the right decision, so you make a spread. You'll buy at 9,000, sell at 11,000. Not only to make a profit, but because there's INHERENT RISK in taking on a position. What if the car turns out to be total shit and worth 5,000 in a week? You protect yourself against unforeseen consequences. That is why no one will EVER completely agree on a price and the market must decide. It needs to have a healthy mix of market markers who provide liquidity, speculators, and arbitrageurs.
people seem to go to the extremes when reading the opinions of others in these debates, me included. I think we often disagree with a certain portion of somebody's statement and automatically attribute a viewpoint to that particular person.
Why do people insist on referring to the State, Economy, Politics as these abstract institutions which trascend the mundane sphere of experience?
For thousands of years the human being has attempted to regulate and legislate human experience. If individuals, which conform society, in which the State, Politics and the Economy adquire any meaning, are broken, and live in ingorance, any kind of legislation will only make suffering systematic.
People seem to do this with everything, they diagnose a conflict, they censor it, look for alternatives, without ever attending to the comprehension of why the conflict exists.
On January 29 2010 10:51 Yurebis wrote: Rothbardian you the man.
I think all of this stupid discussion could have been avoided if people weren't so indoctrinated to a statist paradigm where we got to rely on the elitists to tie our shoelaces, to give us food, make the grass grow, etc.
Capitalism, free market isn't a nasty monster that's going to come out from under your bed and eat you, damnit. Capitalism = free people working voluntarily. Anything other than capitalism has to be forced intervention. Be it a democratic government, a dictatorship, communism, whatever it is, if it's not voluntary, guess what, it's central planners telling you what you can or cannot do.
Shit guys, I got the perfect economy solution right here. I do whatever the fuck I want with my money, you do whatever you want with yours, and no one forces the other one to do anything, ok? Can we settle on that or do we have to be perpetually arguing over who has the better plan for everyone else?!? Fuck.
What if I want to use my money to buy a bomb to blow up your business so that my business next door is more profitable?
That would be punished via you paying for the damage you did to anothers property. Not only that, but people would be disinclined to shop at your business. Advocates of Market-Anarchy, or Laissez-Faire radicalism, advocate for this, in the general broadest sense:
Of liberty I would say that, in the whole plenitude of its extent, it is unobstructed action according to our will. But rightful liberty is unobstructed action according to our will within limits drawn around us by the equal rights of others. I do not add “within the limits of the law,” because law is often but the tyrant’s will, and always so when it violates the right of an individual. -- Thomas Jefferson
Here again though I find it funny you accuse me of a straw-man when I ask you who had a higher standard of living, the pre or post industrial average man when that is a legitimate Economic question, to you, coming in and denouncing Free-Market voluntaryism on the basis of violation of anothers liberty which is in every case inherently criminal. If that isn't a straw-man I don't know what is. It also belies your bias in the fact you believe that the State produces an egalitarian man, or in the very least can influence a person's behavior. If this was so, merely producing a law proclaiming x activity to be illegal would reduce such activity, but in every case it doesn't. Hence, why Prohibition never worked. You buy into the fallacy of Thomas Hobbes. He has scared you to believe that men are inherently evil, and destructive. This is the biggest load of horse patooty I have ever read. If that was the case then all such Voluntary societies would destroy themselves, yet, even before Hobbes there were Voluntary societies that were peaceful and lasted for hundreds of years. Case in point -- Celtic Ireland, Medieval Iceland (around 1000 to 1300), Colonial Pennsylvania, and in the later years to a very large extent the Old West.
The natural state of man, is peaceful voluntary cooperation. We arrive at such conclusions due to the nature of reason. A man is better off in every sense by peaceful voluntary cooperation rather than violent appropriation in a free society. Is not the inherent predicament of man to be self-interested, and of this highest order of self-interest is preservation of life? We see this borne out in Switzerland who have the least restrictive gun laws of any society, and yet the lowest crime rates. If your hypothesis was correct, and that of Hobbes, the mere presence and ease of acquisition would lead to more crime, more death, and more destruction, yet, the exact opposite is true. How do you account for this discrepancy?
Actually, I'm Chinese and you should call me a Legalist if anything. I'm not even from the same realm of philosophical thought as you. I don't read Hobbes. What I do read is enough history to know that Celtic Ireland was far from nonviolent.
I'm not scared by a guy I've never read. Rather, I've been outside the house enough to see that a law won't prevent x activity unless there's a cop and a jail waiting for the guy who breaks it. The natural state of man is not peaceful voluntary cooperation, hence why man developed laws in the first place. You take an amazing number of leaps in logic to come to your conclusions. Sure is nice to know that you've definitively nailed down the nature of man though.
I find it odd that all these theories rely on vast assumptions about the nature of man. You ever entertained the notion that the nature of man might be debatable? I notice people do this several times in the course of economics. Man is inherently selfish. Man is inherently rational. Man is inherently peaceful and cooperative. Where are all these men you keep hiding? I don't see them in my world. I see a lot of decent, yet flawed, and quite often bone-headed people with a laundry list of insecurities and foibles that lead them to make all kinds of decisions that are not perfectly rational nor inherently selfish.
Again, all I've seen are theories that seem very detached from the reality that's out there. I guess violence is just a byproduct of laws. Without laws, nobody would be violent.
We call that Moral Hazard and that is a product of the State. Secondly, there will always be crime, for the sole reason that humans have free will. We recognize this fact, and have property rights written down and codified so as to create a common link and understanding in society. No where did I say Celtic Ireland was non-violent, or that crime would disappear. On the contrary. Celtic Ireland was as advanced a society as any other Western Nation-State, yet, they were wholly voluntary and Stateless. Your theory cannot account for this. For if it could, it would contradict your beliefs, yet you still hold fast that a monopoly must be for the safety and security of society.
Apparently, you have skipped over the history of Tuath's and Land Associations. They were private law societies.
So humans are naturally peaceful and cooperative, yet you turn around and say if humans have choice they will commit crimes for the sole reason that they have choice. That doesn't make sense.
Even so, moving on, you say that you recognize criminal activity will exist. Yet, recognizing something and writing it down on paper is not an adequate solution for how to stop said person from engaging in anti-social behavior. You've provided no answer. I'm pretty sure society understands when someone's committed a crime and usually don't need a piece of paper to tell them it's fucked up to steal someone's chicken.
As an aside, I have to ask you to please stop with the annoying ass extrapolations you keep trying to make about who I am and what I believe. First you accuse me of following Hobbes. Then you accuse me of having a theory. I don't have a theory. I have a brain. I think like an individual, not some creepy cultist who continually refers to himself as "we" and can only see the world in terms of theories or schools of thought. I'd rather you just have a conversation, rather than try to fit everything you see into some kind of box.
The point I think is that people are able to foresee violence and prevent it in a number of ways. Maybe that wasn't quite possible in the past due to very severe limitations on information, I don't know, don't feel like theorizing and trying to justify why "slavery" happened, but that I see it being quite possible today.
The "we" you talk about... that's exactly how I see it too man. I wish "we" would stop saying "we" all the time, for each time "we" do, "we" are just forcing others to do what "we" want. Enslaving ourselves if you may.
edit: by it I mean anarchocap Anarcho-cap is quite possible today
On January 29 2010 12:44 lixlix wrote: people seem to go to the extremes when reading the opinions of others in these debates, me included. I think we often disagree with a certain portion of somebody's statement and automatically attribute a viewpoint to that particular person.
At the start of this thread, I got out my economics book that I used in the course I took last semester (microecon 101). The next thing I did was start counting who and where sources were used. The OP's source required me to pay, so I don't even know if I should count. Then I read this thread, and besides referencing my econ book to look things up (to verify) I saw no sources. Until zero caller.
Here is a summary of the important posts in this thread (w/ my commentary)
Now, the way I see it, what's currently taught in economics and finance classes in America is this concept of globalization, free market, capitalism, and less taxes/regulation = increased economic prosperity.
I want to go ahead and say that's crap.
First, one of the central tenets of modern capitalism is this concept that the "free" market leads to benefit for everyone. They think that things naturally move to an equilibrium in demand/supply/price if left alone. The rationale for this is that people, with enough info, are perfectly rational beings that make the best choices.
The problem with this theory is it doesn't account for the destructiveness of monopolies. In business, anytime a group has either grown or merged into a large enough economic body, they can start to implement destructive strategies like dumping a ton of their products at a very cheap price onto a foreign market and wrecking the local competition. This is validated by capitalism and the free market because this is merely a strategy to increase market share, and if they have the resources to engage in such an act, then they have every right to.
Over the span of a few years, this group demolishes the local competition and creates a monopoly. Then they jack up the prices a ton and win back all the profits they gave up with this strategy. Except once they've recouped their investment, they continue to do it perpetually. This is a win-lose scenario. Yet, it's an example of what happens on the "free" market. This doesn't lead to constant competition and cheaper prices/higher quality for everyone. This leads to a stagnant market where one giant is in control and sells at exorbitant prices because they are the controllers of all supply.
In capitalism, it's theorized that the only way to combat this is for another giant group to emerge. Yet, this sort of competition doesn't help at all. While the two giants are growing, they experience economies of scale and their efficiency increases. Yet, once they reach a certain size, they start to experience the DISeconomies of scale from being too bloated. But they have to continue this arms race, because if they try to scale back, the other one will have the advantage in buying power for that short window of time and can steal more market share, thus perpetuating an advantage until the guy who stepped back first is destroyed.
This creates an effect where giants are constantly forced to grow bigger to compete, even though in the long run it leads to a net loss in efficiency. This is what the free market creates.
The problems with this are obvious. This is why countries have effected protectionist policies to defend against these sorts of aggressive economic strategies. Then you no longer have a free market. It becomes mixed. Our world is full of mixed economies.
The last 30 years of economics in the USA and the world, is a constant attempt to try to bring down these protectionist strategies on the belief that free market was more efficient and beneficial for all. Peep the giant economic collapse we just had. It's pretty obvious to everyone now that this free market liberalization was a horrible idea. It destroyed local industries, it gutted nations, it destroyed whole swathes of industry in nations, and all it really did was lower the retail prices of goods.
What use are lower prices when you don't have a job?
That's the problem with the concept of free market. It's too focused on price of goods as a barometer for efficiency. It fails to address the issues of labor and wages. Now if you try to approach the labor market using capitalist and free market principles, you end up with sweatshops in China and India.
Does anyone honestly think it is a good thing to compete with sweatshop workers in terms of pay/productivity?
There is only one real way to improve labor's market value, which is training that improves their productivity. Yet, the sad truth of the matter is that even with a great education, a large proportion of the population is not that clever. They can't really be trained that far past the level of a sweatshop worker. This is what's traditionally known as "retail sector" or "blue collar."
This makes up a pretty large percentage of the world population. Yet, the blue collar workers in America don't want to work in sweat shop conditions. Capitalism and the free market tells us that the smart thing to do is just tell those blue collar workers to fuck off and move the factories to China.
This is why you see an increasing wealth disparity between the rich and poor in America. The poor have lost their jobs to the increasingly "free" labor market, whereas the rich and intelligent Americans have increased their value because they have some of the world's best education, coupled with some of the world's best tools of production.
AKA, the American factory worker must compete with the Chinese sweat shop worker.
The American Harvard graduate competes with the Chinese Beijing University graduate. Except the Harvard graduate gets to enter an organization like Goldman Sachs, with some of the world's best financial algorithms and the best financing and the best connections.
Therefore, while the free market has allowed the Harvard graduate to reach greater and greater heights by reaching the pinnacle of the financial world and reaping the benefits of competing vs the world due to massive, built-in advantages, the American factory worker has been laid off and can't find another job because he/she is now competing versus the 5 billion people of the developing world.
Do you guys see now why the free market is not helping the vast majority of America?
And if you look at the labor markets, the greatest shift has been away from manufacturing and towards retail. Yet it's a nonsensical shift. How does it make any sense when the retail industry is driven by consumption, and the consumption is paid for by wages from the retail industry?
This is like saying, I get a job at Gamestop. Then I buy a ton of games from Gamestop. Eventually, Gamestop will expand because I'm buying so many games with my wages from them, that Gamestop's sales will be enough to expand.
It makes no sense. Money is constantly being pulled OUT of the economy this way. Every time you put $50 through the system, you end up with less. First, I get the job at Gamestop. They pay me $50. Yet, I pay income tax on that $50. It then becomes $42.
This $42 is then spent to buy a game. Yet I need to supplement it with another $8 from somewhere. So, already I'm at -$8. Okay, $50 + tax = $53. Now I'm at -$11.
Then Gamestop gets their $50 and has to pay corporate tax on it. So they're down to what? $40? A net of $-21 for a single transaction between retail to employee and back to retail.
So, in every transaction of $50 of wages going out of the system, we end up with only $29 of it going back in. It's rather obvious that the US labor/wage market can not be sustained by this type of relationship.
The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.
The reason is because the tax dollars are being siphoned off. That $21 that was taken out is given to the government. Yet, the government we have today is increasingly controlled by corporations. According to current moral and economic philosophy, like that espoused by Jibba and others on TL, it's perfectly okay and constitutional for a corporation to get involved with government. On top of that, morals have no place in economic decisions. Therefore, it is completely okay for a corporation to try to pay to get laws passed that benefit the corporation.
What this means is that those $21 instead of going back into an industry that benefits the lower classes could be funneled into an industry that doesn't support hardly any of the middle-lower classes. Such as the banking industry! So, not only is the middle class losing jobs, competing with a vast number of foreign competitors, but they lose nearly half of every dollar to that mfing Harvard graduate. Because he/she is busy wheeling and dealing, screwed a bunch of people over with greedy "capitalist" ploys, and then needed a bailout.
This is how Main Street gets shafted.
On top of that, to the people who claim that of course the solution to all this is just get rid of taxes, I ask the question, ok, then where is the growth?
Sure, without taxes the $50 between me and Gamestop is cycled back and forth. Yet, that $50 will never grow. It remains $50. Therefore, even in the most ideal of circumstances, the money is not lost, it only remains the SAME. ZERO growth.
In fact, accounting for inflation, you'd still see a loss of $1-2 each year. The industry continues to lose in a perfectly ideal situation. This is why the concept of consumer-based society leading to growth is total bullshit. You cannot grow an economy by spending money. That doesn't work.
The only way to grow the economic pie is technological innovation which decreases the cost of production. This way, I spend $50, Gamestop gets their $50 back. Yet, they have factories/studios that can produce the game for only $5. Therefore, they pay me $50, I buy from them for $50, they get back $45. They can then afford to make 9 more games. With 9 more games, they can make enough money back to hire 8 more workers. This way the loop continues.
Except somewhere in the loop, the business decides that instead, they're just going to pay all those profits to the CEO. We don't need to increase that many jobs. We'll just give it to the top guys. Therefore, once again the middle and lower classes are powerless to stop the flight of money from the consumer-supplier loop.
In pretty much every way, using capitalist and free market principles leads to a loss for the middle and lower classes. This is why Sarkozy says capitalism needs to be refounded to be more moral. That finance, free trade, and competition are a MEANS not an end. And it needs to be redefined and reinvented.
It's because morons run around trying to claim that the free market leads to increased efficiency and prosperity for all as long as everyone just makes decisions in a totally selfish manner. It doesn't. It doesn't work. The past 30 years have shown it doesn't work. It's led to disaster. The globalization and free market proponents were wrong. They did nothing but justify selfishness as a good thing.
your initial post had a little internet in you, and it never quite left. but I agree with what you say + Show Spoiler +
On January 28 2010 06:12 Caller wrote: I'm done with this thread. It's basically a shorter version of the Shock Doctrine with no facts or evidence, cherrypicked or not. When you claim you want to debate something and then proceed to claim that your arguments are watered down for general consumption, you clearly are looking only to entice people that are like ron paul fans or w/e that tend to be more easily-picked apart views when it comes to economical issues.
On January 28 2010 07:18 EmeraldSparks wrote: I love TL threads about economics.
They make me feel warm and fuzzy inside.
monster post. a monster with manners and a brain + Show Spoiler +
On January 28 2010 09:25 ZeroJumps wrote: First, Hi! I have followed the TeamLiquid forums for a while now, but have thus far avoided posting. This thread, however, merits special attention.
It's a provocative title I know. But it's exactly what I want to debate.
Not just because the opening post is lacking in specificity and riddled with errors, but also because the majority of responses have been mere echoes of assent. Its a provocative opening, I know. But it’s exactly what I want to debate.
To start things off I'd like to open with the latest address by President Sarkozy of France: Globalization Got Out of Control
It’s difficult to believe that one would ever see an argument in favor of globalization and capitalism coming out from Sarkozy. Over the last few decades, France has seen significant cultural, social, and economic unrest among its population due to increasing number of immigrants, particularly those from Eastern Europe and the Middle East. I suspect if Sarkozy was seen to be advocating for greater globalization, he would soon be out of a job. This isn’t to say that his points should be discounted, but rather just that one should recognize his likely biases.
Now, the way I see it, what's currently taught in economics and finance classes in America is this concept of globalization, free market, capitalism, and less taxes/regulation = increased economic prosperity.
I want to go ahead and say that's crap.
And I’m going to go ahead and say that you’re wrong. (This isn’t meant to spark a flame-war, but rather to announce my intention to debate the rest of your post)
To begin, you will need to be a little more specific in your terminology. What do you mean when you say “free-market”, and less “taxes and regulation”? Are you talking about capital gains taxes, income taxes, or taxes in general? Do you mean less regulation on business? Or less regulation on capital and labor flows? One last point on this paragraph, and that is to say, as written, it is mostly correct. However, it should be noted that the predicted increase in economic prosperity is never immediate, nor does it imply that there will not be losers among certain segments of the population. Rather, increased economic prosperity is viewed in the aggregate, or the sum of the entire population.
First, one of the central tenets of modern capitalism is this concept that the "free" market leads to benefit for everyone. They think that things naturally move to an equilibrium in demand/supply/price if left alone. The rationale for this is that people, with enough info, are perfectly rational beings that make the best choices
.
This is true if one is considering only the most basic or unrealistic economic models. I’m not entirely sure what you mean by “if left alone”, but I’ll take it to mean zero regulation, no taxes, and complete freedom in the movement of capital and labor. Also, I think you will find that every market, no matter how regulated or restricted, reaches some kind of equilibrium. I think what you meant to say is that economists believe the market will reach a perfectly competitive equilibrium, where you have many identical firms producing a given good at where price is equal to marginal cost.
While some models do predict a perfectly competitive equilibrium from these things (and often only because they simply don’t include measures of them), I don’t think you could find a serious economist who believes such an equilibrium would result. As an aside, that kind of world is essentially anarchistic, and it is difficult to imagine any sort of nation-state even existing, let alone trading.
The problem with this theory is it doesn't account for the destructiveness of monopolies
.
Which theory? Please be more specific. There are many economic models which do, in fact, account for the “destructiveness” of monopolies. Some kinds of monopolies also argue against your belief that economists always believe less regulation is a good thing. There are many situations where a regulated monopoly is the most desirable option. Any industry with high fixed costs and low marginal costs is well suited to allowing such a monopoly to exist, such as electric companies and telephone companies. (Imagine if there were many electric companies, and each had to lay their own power lines!) You are right that such monopolies could be “destructive” if they weren’t regulated, but my point here is that even “free market” economists see the value in certain kinds of regulation.
In business, anytime a group has either grown or merged into a large enough economic body, they can start to implement destructive strategies like dumping a ton of their products at a very cheap price onto a foreign market and wrecking the local competition. This is validated by capitalism and the free market because this is merely a strategy to increase market share, and if they have the resources to engage in such an act, then they have every right to. Over the span of a few years, this group demolishes the local competition and creates a monopoly. Then they jack up the prices a ton and win back all the profits they gave up with this strategy. Except once they've recouped their investment, they continue to do it perpetually. This is a win-lose scenario. Yet, it's an example of what happens on the "free" market. This doesn't lead to constant competition and cheaper prices/higher quality for everyone. This leads to a stagnant market where one giant is in control and sells at exorbitant prices because they are the controllers of all supply.
I’ll begin by saying that many countries do indeed have anti-dumping laws to protect against just that. But such laws are foolhardy. Your assessment lumps together two distinct kinds of dumping.
The situation you’re describing is one in which a company prices their goods such that price is less than marginal cost, meaning they take a loss on every item sold (a.k.a. several recent game consoles). Such maneuvers can often result in other companies being forced out (note, however, that this is not limited to international competition). However, such behavior is not economically viable in the long run. As you say, prices must eventually go up. The extent to which people are willing to pay premiums above which they originally paid however, is limited by the elasticity of demand for that good. No one is going to pay $12 for a nail when they can buy a screw instead for $.01. Furthermore, once the company raises prices to above price equals marginal cost, it opens the door for competition to once again enter the market.
The second situation is one in which the company prices their goods below the prices of other similar goods in the area, but at a price above marginal cost. This is a perfect example of specialization. If one company or country can make a profit by selling their goods at a lower price than another, then that company or country should specialize in the making of that good. Certainly, there will be some negative elements involved, such as workers of the higher-priced company being laid off, but the net gain to society more than compensates for that loss. Although this gain is most often considered in terms of lower prices, consider that lower prices result in increased profits of other companies, allowing them to expand and create new jobs.
In capitalism, it's theorized that the only way to combat this is for another giant group to emerge. Yet, this sort of competition doesn't help at all. While the two giants are growing, they experience economies of scale and their efficiency increases. Yet, once they reach a certain size, they start to experience the DISeconomies of scale from being too bloated. But they have to continue this arms race, because if they try to scale back, the other one will have the advantage in buying power for that short window of time and can steal more market share, thus perpetuating an advantage until the guy who stepped back first is destroyed.
What? This sounds like something you didn’t think through properly. Did you have a specific example in mind here? What does it mean to have “an advantage in buying power”? What do you mean by “scale back”? I also think you are confused about the nature and importance of market share. For the sake of argument, however, this is how I will take this paragraph: Both companies are too large. Thus, the price of their goods has risen (due to operating inefficiencies perhaps). One company recognizes this, and reins in their production (perhaps closing several production plants or store outlets). The other does not. By not doing so, the inefficient company gains an advantage over the efficient company (perhaps because they have more production plants relative to the other company now), and uses that inefficiency to eliminate the other company. The problem with that is that the first company is, by definition, inefficient. It cannot gain an advantage over the other company. How could it? The other company will produce the same good, but for a lower price. I think perhaps you believe market share to exhibit some kind of snowball effect, whereby once you achieve the largest market share, then you automatically eliminate the competition. Perhaps I have misunderstood you, but such behavior is not predicted in economic theory, nor is it seen in the real world. In the case you described, the inefficient company has no choice but to follow suit.
This creates an effect where giants are constantly forced to grow bigger to compete
This is misattributing cause and effect. Companies don’t grow bigger so that they can compete, companies grow bigger because they are competitive. Walmart didn’t just decide to become a national chain so that they could be competitive. They became a national chain because they were competitive. At the risk of being too repetitive, companies rarely ever grow bigger unless they are efficient.
even though in the long run it leads to a net loss in efficiency. This is what the free market creates.
My previous statement makes this false. The most successful companies are the most efficient. This makes intuitive sense. You don’t see large, successful companies that are inefficient. (Unless you count the US government as successful, but that’s beside the point )
The problems with this are obvious. This is why countries have effected protectionist policies to defend against these sorts of aggressive economic strategies. Then you no longer have a free market. It becomes mixed. Our world is full of mixed economies.
Since your earlier statements were not true, the problems with this are not obvious (sorry if this seems too confrontational, it is the way my mind proceeds when I attempt to make an argument). You are right that countries have created protectionist policies to defend against domestic problems resulting from international trade. But those policies are always misguided. Why do they create them? Because the advantages gained from trade are much more difficult to see than the losses. A reduction in the price of nails from $.02 to $.01 as a result of trade saves millions, if not billions, of dollars per year. But no single company sees that entire picture. But the workers in the U.S. who make nails and got laid off are highly visible. They write to their congressional delegation. They appear in the newspaper and on television. Yet the sum of their wages might not even total a million dollars per year. Even though the net gain is much higher, it is not as noticeable.
The last 30 years of economics in the USA and the world, is a constant attempt to try to bring down these protectionist strategies on the belief that free market was more efficient and beneficial for all. Peep the giant economic collapse we just had. It's pretty obvious to everyone now that this free market liberalization was a horrible idea. It destroyed local industries, it gutted nations, it destroyed whole swathes of industry in nations, and all it really did was lower the retail prices of goods.
As another previous post said, this seems like nothing more than a populist outcry. Blaming the economic collapse on efforts to bring down protectionist barriers does not make sense. I fail to see how trade tariffs, immigration restrictions, and limits on international capital flows have anything to do with banking regulation. Capital flows and capital gains taxation are in the realm of banking, but are not themselves causal agents in the collapse.
That's the problem with the concept of free market. It's too focused on price of goods as a barometer for efficiency. It fails to address the issues of labor and wages. Now if you try to approach the labor market using capitalist and free market principles, you end up with sweatshops in China and India.
I think the price of goods is an excellent barometer for efficiency. While I believe using it as a measure does neglect many important other things, such as happiness or environmental concerns, the one aspect it does excel at is to provide a measure for labor and wages. Wages mean nothing with a price to compare them to. $1 a day will buy one nothing now, but 100 years ago? Similarly, a wage is nothing more than the price of labor. Perhaps you meant that the focus of companies on the price of goods prevents them from paying adequate attention to the needs of their workers. (I think this is, after rereading your paragraph, how you meant it). Sweatshops are an oft-cited example of “evil corporations” that exploit people. I typically associate this kind of statement with people who have never been outside of first-world countries, or experienced true poverty. Not poverty as defined by the US ($22,000 for a family of four), but poverty of the kind where people earn less than a $1 a day. In such situations, a job at a sweatshop is almost a miracle. The alternative to such jobs in poor countries is frequently to not know if or when you will eat again. People living in developed countries often forget how terrible situations can be elsewhere. A common counter-argument to this is “Well, why don’t companies just pay them as much as they pay their American workers?” There are many answers to this. The best is probably that the labor pool is just too large. The United States makes up a but a tiny fraction of the world’s population. For every child in Egypt making shoes for $2 a day, there are a hundred more who would be willing and happy to do it for $1 a day. A second is that, if they did, there would be no incentive to hire workers abroad. All it would do is increase the costs of their goods, as they would need to be shipped further.
Does anyone honestly think it is a good thing to compete with sweatshop workers in terms of pay/productivity?
There is a reason manufacturing industries are declining in the United States. Does anyone honestly think this is a bad thing? American wages have been increasingly consistently over the last...250 years. Unemployment has stayed all but constant, and far lower than almost any other country on the planet. This suggests that the positive effects from structural changes in the economy, such as the shift from a manufacturing based economy to service based economy, far outweigh the negative.
There is a common story told about such shifts: Everyone used to worry that robots would take over all of the manufacturing jobs, and then there would be massive unemployment. Except, when the robots took over, the unemployment spike didn’t happen. Why? Because people were needed to build, operate, and maintain the robots.
Countries specialize in the things they are best at. The United States used to be among the best manufacturers in the world. So there were many manufacturing jobs. Now, as our standard of living, our productivity, and educational attainment have all increased, we are no longer the best at manufacturing. We still might be able to produce more per person than another country if we focused on manufacturing, due to our infrastructure and technology, but what would be the point? Instead, we move onward and upward into a service-based economy.
There is only one real way to improve labor's market value, which is training that improves their productivity. Yet, the sad truth of the matter is that even with a great education, a large proportion of the population is not that clever. They can't really be trained that far past the level of a sweatshop worker. This is what's traditionally known as "retail sector" or "blue collar."
The first sentence is more or less correct, though it neglects the role of technology. I agree that the intelligence of the average person of the United States is “not that clever”. But, again, go outside of the first-world. The literacy rate in the US is close to 100%, and almost every student attends some high school. While poor countries have made great strides in recent years (thanks to globalization. . .), almost 100 still have literacy rates below 80%.
This makes up a pretty large percentage of the world population. Yet, the blue collar workers in America don't want to work in sweat shop conditions. Capitalism and the free market tells us that the smart thing to do is just tell those blue collar workers to fuck off and move the factories to China.
And this is a problem because? I understand that, given the current unemployment rate, and given how the recession has disproportionately effected men in manufacturing, that such a response seems callous. That’s because it is, in the short term.
This is why you see an increasing wealth disparity between the rich and poor in America. The poor have lost their jobs to the increasingly "free" labor market,
Is it? Does $30,000 a year for a factory worker job narrow the wealth disparity between the rich and the poor? No, it does not.
whereas the rich and intelligent Americans have increased their value because they have some of the world's best education, coupled with some of the world's best tools of production
AKA, the American factory worker must compete with the Chinese sweat shop worker.
I just want to point out here that the standard of living and the wage level for all income groups has being increasing in America since its founding. It isn’t that the poor are getting poorer and the rich richer, it is that the rich are getting richer faster than the poor are getting richer.
The American Harvard graduate competes with the Chinese Beijing University graduate. Except the Harvard graduate gets to enter an organization like Goldman Sachs, with some of the world's best financial algorithms and the best financing and the best connections.
I think you meant: The American Harvard graduate competes with the Chinese Harvard graduate. And that is one the best thing about having less protectionism. With more freedom of movement for labor and capital, the best and brightest in other countries are allowed to make use of the top schools in the world.
Therefore, while the free market has allowed the Harvard graduate to reach greater and greater heights by reaching the pinnacle of the financial world and reaping the benefits of competing vs the world due to massive, built-in advantages, the American factory worker has been laid off and can't find another job because he/she is now competing versus the 5 billion people of the developing world.
Right. But again, this is a short term loss for a much greater long term gain. Think about the industrial revolution. It was essentially the same, except that instead of services replacing manufacturing, manufacturing replaced agriculture. Does anyone (other than dirty hippies) think America is worse off for having undergone that transformation?
Do you guys see now why the free market is not helping the vast majority of America?
To go back to the linkage between prices and wages: you don’t see how it is helping because you simply don’t notice it. When you go grocery shopping, do you stop to think, “My grocery bill this week was $100 less this week because of free trade”? Free trade results in a purchasing power increase of tens-of-thousands of dollars every year for each and every person in the United States. That is not an exaggeration. Consider how many goods you buy every year, and then realize that anything not made in the United States is cheaper than it would be otherwise. Even goods made in the United States, such as strawberries from California, are cheaper because they have to compete with Mexico. And, if that’s not enough, consider that you even have the option to buy strawberries in January. All because of free trade.
And if you look at the labor markets, the greatest shift has been away from manufacturing and towards retail. Yet it's a nonsensical shift. How does it make any sense when the retail industry is driven by consumption, and the consumption is paid for by wages from the retail industry?
Are you asking how can goods continue to be produced in a country if no one is actually making goods?
This is like saying, I get a job at Gamestop. Then I buy a ton of games from Gamestop. Eventually, Gamestop will expand because I'm buying so many games with my wages from them, that Gamestop's sales will be enough to expand.
It makes no sense. Money is constantly being pulled OUT of the economy this way. Every time you put $50 through the system, you end up with less. First, I get the job at Gamestop. They pay me $50. Yet, I pay income tax on that $50. It then becomes $42.
This $42 is then spent to buy a game. Yet I need to supplement it with another $8 from somewhere. So, already I'm at -$8. Okay, $50 + tax = $53. Now I'm at -$11.
Then Gamestop gets their $50 and has to pay corporate tax on it. So they're down to what? $40? A net of $-21 for a single transaction between retail to employee and back to retail.
So, in every transaction of $50 of wages going out of the system, we end up with only $29 of it going back in. It's rather obvious that the US labor/wage market can not be sustained by this type of relationship.
I don’t really know what to make of this. It almost seems like you see tax money as being removed from the system.
The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.
The reason is because the tax dollars are being siphoned off. That $21 that was taken out is given to the government.
Right. You do see taxed dollars as just vanishing. Let me redo your gamestop example (keeping it simple):
You work at gamestop. You get paid $100. Income tax takes 20%. You now have $80. You buy a game for $50, with $5 of sales tax. Now, gamestop has -$50 (the game – your income). You have $25. The government has $25. The government uses that $25 to buy concrete an pay a worker to repair the pothole in your street. Now that worker has $25. Now he buys a game from gamestop. Which fuels your next paycheck.
Economies are vast. Money changes hands very frequently. Money doesn’t just disappear from the system.
Yet, the government we have today is increasingly controlled by corporations. According to current moral and economic philosophy, like that espoused by Jibba and others on TL, it's perfectly okay and constitutional for a corporation to get involved with government. On top of that, morals have no place in economic decisions. Therefore, it is completely okay for a corporation to try to pay to get laws passed that benefit the corporation.
This reads like a conspiracy theory website. I can’t argue that corporations don’t heavily influence politics. But, two points to consider: first, the United States has one of the highest capital gains tax rates in the world. This is extremely detrimental to business. Second, income tax is progressive. Larger corporations pay more in taxes. One would think that, if corporations really had significant influence, these items in particular would be among the first to change.
What this means is that those $21 instead of going back into an industry that benefits the lower classes could be funneled into an industry that doesn't support hardly any of the middle-lower classes. Such as the banking industry! So, not only is the middle class losing jobs, competing with a vast number of foreign competitors, but they lose nearly half of every dollar to that mfing Harvard graduate. Because he/she is busy wheeling and dealing, screwed a bunch of people over with greedy "capitalist" ploys, and then needed a bailout.
I realize that writing quality goes down the longer one writes (witness my own comments), but there really isn’t anything of substance in here. I guess I’ll just point out recent income tax statistics: (google IRS summary of Federal Individual Income Tax Data 2007 or 2008 for source) In 2007, The top 1% of income earners paid 40% of total income tax. The top 50% of income earners paid 97% of total income tax. In other words, of that $21 dollars in taxes, $20.50 of it came from the wealthy. I find it hard to make an argument that taxation is hurting the poor.
On top of that, to the people who claim that of course the solution to all this is just get rid of taxes, I ask the question, ok, then where is the growth?
Sure, without taxes the $50 between me and Gamestop is cycled back and forth. Yet, that $50 will never grow. It remains $50. Therefore, even in the most ideal of circumstances, the money is not lost, it only remains the SAME. ZERO growth.
In fact, accounting for inflation, you'd still see a loss of $1-2 each year. The industry continues to lose in a perfectly ideal situation. This is why the concept of consumer-based society leading to growth is total bullshit. You cannot grow an economy by spending money. That doesn't work.
We don’t have a consumer based economy. We are moving toward a service based economy.
The only way to grow the economic pie is technological innovation which decreases the cost of production. This way, I spend $50, Gamestop gets their $50 back. Yet, they have factories/studios that can produce the game for only $5. Therefore, they pay me $50, I buy from them for $50, they get back $45. They can then afford to make 9 more games. With 9 more games, they can make enough money back to hire 8 more workers. This way the loop continues.
Except somewhere in the loop, the business decides that instead, they're just going to pay all those profits to the CEO. We don't need to increase that many jobs. We'll just give it to the top guys. Therefore, once again the middle and lower classes are powerless to stop the flight of money from the consumer-supplier loop.
Technological innovation is certainly a good thing. It reduces prices. But so does shifting labor to another country. Perhaps another example: Say they fire you because they don’t need you making the game anymore, because they hired a worker in another country. Since they can now make games cheaper, they make more profit, enabling them to expand. You get rehired as architect to design their new buildings. Now instead of being in manufacturing, you’re an architect. (Think about this on a national level, not on an individual level)
In pretty much every way, using capitalist and free market principles leads to a loss for the middle and lower classes. This is why Sarkozy says capitalism needs to be refounded to be more moral. That finance, free trade, and competition are a MEANS not an end. And it needs to be redefined and reinvented.
Remember what I said about Sarkozy’s likely biases and political pressures?
It's because morons run around trying to claim that the free market leads to increased efficiency and prosperity for all as long as everyone just makes decisions in a totally selfish manner. It doesn't. It doesn't work. The past 30 years have shown it doesn't work. It's led to disaster. The globalization and free market proponents were wrong. They did nothing but justify selfishness as a good thing.
There isn’t really anything to respond to here. I would be happy to argue with you some more, if you would like. You said you were familiar with economic concepts in a previous post. Maybe we can break out our favorite international macro or international trade models.
Thanks for reading!
Now, ladies and gentlemen, witness something rarely seen on the internet (in the bold): + Show Spoiler +
On January 28 2010 14:02 StorkHwaiting wrote: To Zero:
Thanks for the lengthy response and your time and effort are much appreciated
1. By taxes I mean things like tax write-offs by corporations through giving to charities/NPOs that end up looping right back to the corporations, the evasion of corporate taxes by giving out huge bonuses to their executives so they can post them as operating expenses, the constant tax cuts on capital gains, and the increasingly labrynthine ways that the top tax bracket finds to evade paying their actual taxes. There are of course a great deal more, but in essence I think the problem stems from corporations and the highest income brackets consistently avoiding taxes through tax lawyers and armies of accountants, while the middle and lower class can't afford these kinds of resources to avoid paying their taxes.
On regulation, I think the most important aspect is the lack of regulation on capital AND labor flows.
2. You're right that serious economists do not posit this theory. The problem is the political rhetoric in America for the last 30 years HAS been positing this theory. If you look at the political activity, it's been repeal after repeal of regulations, while using this theory of perfect equilibrium and efficiency as their rationale.
3. I should have been more clear. I am talking about the political rhetoric in America and the movement toward globalization and deregulation that has been implemented in the political arena of America. OFC economists have accounted for everything under the sun. There are tons of economists out there postulating pretty much every possible permutation I could think of. I don't mean to say the entire field of economics and capitalism is wrong or stupid. What I mean is the political will of America has been trending towards deregulation, free markets, and the flow of capital and labor out of America (labor more than capital).
4. On dumping, what I'm talking about is the first situation, but also a third situation that wasn't mentioned. The third situation is that a government subsidized industry, like agriculture, is able to grow products at a loss, remain profitable due to subsidies, AND dump their excess product on a foreign market, thereby glutting it and ruining the livelihood of local producers. Take for instance what American dumping of goods has done to Haiti's native farmers.
Also, with the first situation, there is a window of time between monopoly and reentry in the market by a competitor. It's a rare situation in which the competitor reenters and immediately takes an aggressive percentage of market share. There is some significant lag time involved and that's why a lot of times a monopolizing entity can play this juggling game of hiking up prices and then dropping them again to squeeze out any legitimate threat, while skimming hefty profits in the back and forth adjustments. Also, over time, many competitors would see this as an industry with significant barriers to entry and high risk knowing that this monopolizing entity will just drop prices when they try to enter the market. It deters competition from ever entering.
5. On the giants issue, I was thinking more in terms of banking. Whereby the bank with more deposits has a significant advantage over a smaller bank, solely because they have more capital and thereby a great advantage in competing. Sort of like holding the most chips at a poker table. It doesn't guarantee a victory but it is definitely an advantage.
You are right in that this is probably a bad example to use for every industry as it does not apply to all of them and in many cases, the more efficient one would force the other one to scale back.
6. I blame the economic collapse more on a combination of factors including deregulation, but I should have been more specific here. And in retrospect, you are right, this was a poorly constructed OP. What I should have said was that deregulation as a political rhetoric and disposition was one of the leading factors of this economic crisis. This is why I think so:
The monetary policy engineered by Greenspan was extremely loose. The political rhetoric of the time was that deregulation of banking was a good thing. This led to a very low cost of borrowing, AKA money is cheap. This environment of cheap money combined with the repeal of laws banning ARMs and loans of that nature led to the bubble in the housing market and ridiculous overexposure in the banking industry.
So yes, in the end, I blame banking regulation, but inherent in that argument is the belief that less regulation is a good thing.
7. Again, I should have been more clear on this point. What I mean is that this a net loss in jobs for the American labor market. And yes, I'd say this is a protectionist sentiment. The corporations say that this is a good thing because the price of goods is cheaper. Yet, if Americans lose jobs and get cheaper goods, what do we end up with? A guy who makes $0 a day is not going to care if sneakers are $20 instead of $45.
My worry when it comes to manufacturing is that, yes there are people needed to maintain the robots, machines, etc but over time I think that number has decreased. Also, these jobs require more and more skilled labor. I'm wondering if these jobs will someday reach a threshold in which only the top 30% of the population are able to even perform them. What would the other 70% of America do then? But maybe this is an irrational fear. Technology is supposed to make things easier.
8. Good point. I would agree that the income gap is materializing because of the accelerated growth among the rich, rather than a drastic decrease in the growth of the poor.
9. I agree that this is exactly the same parallel. In the past agriculture was replaced by manufacture. And now manufacture has been replaced by the service sector. But I wonder if the service sector is truly an adequate replacement for manufacture. Perhaps I am too ignorant of what the service sector entails or how it perpetuates its own growth, but as of now, I have sincere worries about the sustainability of America becoming a predominantely service-sector based economy. I would love to hear your thoughts on this.
10. About money disappearing. When the US uses that money to launch a missile at Afghanistan, I see that money as disappeared. When the US gives that money to some contractor who installs a toilet for $1,000 I see that as disappeared. When the US takes that tax money and shoves it into Fannie Mae to buy up toxic loans, I see that money as disappeared. While spending on infrastructure would be fantastic, I don't see a lot of the tax money being spent that way. Instead, I see corporate interests directing government spending into channels that don't return to the consumer.
11. Your numbers are correct. But the wealthy used to pay even MORE than this. And I think they should pay more.
Anyhow, hope the numbering I did wasn't too confusing. I'm not good with quotes so I didn't want to go in and try to respond to each quoted block of text. Thanks again for responding and I will admit that you proved me wrong or showed that I needed to more greatly clarify on a number of points.
Still, I hold serious doubts about the virtues of shifting to a service based economy and whether that is truly beneficial for the people.
Also, I hold serious doubts about the fiscal policy of the US government.
I also hold serious doubts about the way taxation of corporations are handled.
But most of all I have serious doubts about capital and labor flows. While it is easy to say that everyone will move into the service sector and be happy, I've yet to see the service sector actually provide enough jobs to replace all the ones lost in agriculture and manufacture.
Graciousness. On the internet. mad props, storkhwaiting & zero caller. I will read any more discussion threads you make and contribute if I actually know what I'm talking about.
All the important posts after this are discussions not relevant to the main post, but discuss good sources from which to further learning.
There was one last post that I don't feel like finding, but it said (paraphrased) "everybody who goes to school gets brainwashed." lol...no. Especially with economics, most things don't make intuitive sense unless thoroughly investigated.
This is under the assumption they have such knowledge. Most cases, we, as a population, do not have such knowledge. =/ Problem with Capitalism, we don't have perfect information.
Let us look at a scenario between a doctor and a patient. The patient needs a treatment, and while it may not necessarily be now, it must be sometime. The patient doesn't know how much a surgery will cost, it could cost $10, it could cost $1,000,000, they simply do not know. After all, how could they? Also, they do not necessarily know the quality of such a product. Could this doctor be a good surgeon, or does his patients usually suffer unusually long times of pain? You say the patient might know from the amount of customers, but how would they find out? Do they stand outside the door all day long? Either way, the opportunity cost of searching up such information could be higher than the gain from knowing it, and furthermore, such information might only be attainable under the loss of a substantial amount of money. So, how would the patient decide whether or not to get this surgery? They could move on, but do they know anymore? This lack of perfect information skews the results of the market, and gives much more than "equal" power between consumer and supplier.
The state doesn't have perfect information either... in fact they have a lesser incentive to, because the business to which they attend are not their own, but of others they may never meet or come face to face with.
May I propose that the question should be not "whether you can make the right choices?" but "who has the best incentives to make the right choices?" plus "right choices for who?"
No, the state doesn't, but it will usually have much better information than an individual. Incentives play no role in this as "right choices" are 1. Opinion based, unless you're talking of economically efficient being the right choice, but that completely disregards morality. 2. Relies upon the assumption there are choices available. 3. Relies upon that the option of a "right choice" is available. Which, often times, there isn't. Without perfect information, or at least even DECENT information, no right choice is forseeable.
Now, let us add a new number into my hypothesis above. Suppose the "right amount" or "equilibrium price" was $50,000. How could the patient EVER get to that price if each doctor charges him $500,000+ or nothing, and he doesn't have the information to offer $50,000? How can he argue against the doctors without sufficient medical knowledge?
Wait... who says what the equilibrium price is? IMO there is no equilibrium price (there is no spoon luls).. I think if you're really interested about the aspects of trade you should study uh catallactics.
The state has *no way* of knowing how much *you* value anything because that which you value can only be known after-the-fact, only after you buy something or perhaps even assert your wish to buy something for a certain cost do we know that you value the "something" more than the "cost" (in dollars if it may be)
A trade is made because both parties value the objects being traded differently! Can we agree on <--- that?
Equilibrium price is the price determined by the market given a supply and demand schedule which is the aggregate of people's personal demands and the suppliers personal well, supplies. But fair enough if you do not believe in an equilibrium price. And no, the state really doesn't. That's a problem with it, and the problem with the market is lack of perfect information. Thus, we can't really say one is the best, only that in certain circumstances, one is preferred over another. =/ Yes, I agree with that assumption. Sorry if I'm frustrating you.
Naw it's not frustrating, I like teaching and being taught, that's what we be doing here I hope. Maybe I was too harsh on saying that an equilibrium price doesn't exist. Well it certainly doesn't exist somewhere in reality, like.. objectively. But an equilibrium price would be only an approximation to that which you find other peoples evaluations to be at. Like.. there's no exact price, it's only approximations.. because even at the lowest common denominator, the individual, their values are also constantly changing... so.. there certainly can't be an exact price even if we were all to have our heads scanned and analyzed by some really good keynesian.
I don't see lack of perfect information as a "problem with the market" .. well, it's as much of a problem as "people can't fly" or "move through walls" if you know what I mean.
Haha, that's very true. It is very interesting to learn through conversation and civil debate. ^_^ That point, I agree on. An equilibrium price, as far as I'm concerned, is an ideal. Much like infinity,you can get the idea, but to reach it is incredibly difficult. Nonetheless, to have the idea there as an indicator is still useful, much like how the concept of infinity is useful in mathematics.
Hmm, well, I highly disagree on that point. =/ See, the market works because there is a struggle between two forces, both of which are trying to do the best for their own good, to make a mutually beneficial choice. I think of it much like a court room, where two sides battle it out to find the truth of the matter. However, if one side suddenly doesn't have a crucial witness, or piece of information, the system falls apart. =(
Define "fall apart". Certainly one would come up on top in that case but the fact that there was a conference in the first place shows you that these people were willing to engage in their dispute civilly and adhere to the jury or judge's decision!
Well, by fall apart, I meant that the point of the trial failed. Sure, something the trial happened, but see, that's not the point of the trial. The point of the trial is to find the truth, to make sure justice comes out on top. However, with insufficient information, we do not know whether or not the correct verdict was chosen.
Also, Moral Hazard applies to everything, not just the state. It is not, by definition, caused by the state. In fact, it applies to people as well. If you get insurance, you're more likely to drive more recklessly. =/ Stuff like that.
Hmm... the point of the trial was to find the truth? Maybe for the verdict.. but past that, it also comes down to what the sentence should be, those being gray areas of punishment and retribution.. There is no truth to be sought at that point (unless you're a very hardcore moral objectivist) but really, only disputes to be settled in a way thats good for the court's clients, some ruling that they abide by and approve of. That's not being limited to the prosecution and the defense but also any future clients. edit: forgot to quote
Hmm, true. But here, the dispute can be settled by either the judge or the jury here, which, interestingly enough, completely kills my model. Also, stryker provides very good arguments which I cannot answer at the moment. So yes, thinking time... =/
"In 2004, there were 34,785 registered lobbyists—65 lobbyists per congressperson. This is an increase of 113 percent since 2000, when there were 16,342 lobbyists."
These numbers are made public by the Senate! It us up to us to think critically of what the consequences may be.
There is a serious overrepresentation of corporate clients and a huge under-representation of the everyday people. Is there even time with 65 lobbyists per congressperson to really leave time for their voting constituents voices to be heard?
I'm not anti-business nor am I completely pro-government. I believe in a healthy balance of both. I want to see a *working* checks and balance system. I am just starting to realize/feel my helplessness as a citizen in this political system.
Here are a few startling facts derived from Two Income Trap. Please note that this book was published in 2003, way before this economic depression/recession:
- "Subprime lending has . . .ensnare[d] people who, in a regulated market, would have had access to lower-cost mortgages. Lenders' own data show that many of the families that end up in the subprime market are middle-class families that would typically qualify for a traditional mortgage."
- "A study by the Department of Housing and Urban Development revealed that one in nine middle-income families (and one in fourteen upper-income families) who refinanced a home mortgage ended up with a high-fee, high-interest subprime mortgage.
- "In 2002, Citibank's subprime lending subsidiary was prosecuted for decptive marketing practices, and the company paid $240 million to settle the case (at the time, the largest settlement of its kind). A former loan officer testified about how she marketed the mortgages: "If someone appeared uneducated, inarticulate, was a minority, or was particularly old or young, I would try to include all the [additional costs] CitiFinacial offered."
- "According to one study, African-American borrowers are 450 percent more likely than whites to end up with a subprime instead of a prime mortgage. In fact, residents in high-income, predominantly black neighborhoods are actually more likely to get a subprime mortgage than residents in low-income white neighborhoods - more than twice as likely."
- ". . .lenders have found that foreclosing can be more profitable than just simply collecting a mortgage payment every month, because the property can then be resold more than the outstanding loan amount." ***my aside, obviously this was before the recession and looked what has bite them in the a$$***
- "Credit card issuers make their profits form lending lots of money and charging hefty fees to families that are financially strapped. More than 75% of credit card profits come from people who make those low, minimum monthly payments. . .These are the families that are singled out by the lending industry, barraged with special offers, personalized advertisements, and home phone calls, all with one objective in mind: get them to borrow more money."
- "Sears reportedly earned more money from the interest and late fees the company charged to its credit cardholders than it earned from selling merchandise."
- "Payday lenders and subprime mortgages companies deliberately target minority neighborhoods, confident that they can get away with fleecing these families."
- "Hispanic homeowners are nearly three times more likely than white homeowners to file for bankruptcy, and black homeowners are more than six times more likely."
- "In just two decades, the number of single-filing women declaring bankruptcy has grown by more than 600 percent. Women with children are more likely to lose their homes and more likely to be late on their bills. And single women with children are three times more likely to go bankrupt than men without children.
On January 29 2010 12:45 years wrote: Why do people insist on referring to the State, Economy, Politics as these abstract institutions which trascend the mundane sphere of experience?
For thousands of years the human being has attempted to regulate and legislate human experience. If individuals, which conform society, in which the State, Politics and the Economy adquire any meaning, are broken, and live in ingorance, any kind of legislation will only make suffering systematic.
People seem to do this with everything, they diagnose a conflict, they censor it, look for alternatives, without ever attending to the comprehension of why the conflict exists.
Just a question off topic. How is Otto Guevera doing? While he is not an Austrian, it is important to note he is pretty libertarian leaning. I don't really speak spanish, but could you let me know if he is actually for Sound Currency? Thanks.
On January 29 2010 12:52 KurtistheTurtle wrote: At the start of this thread, I got out my economics book that I used in the course I took last semester (microecon 101). The next thing I did was start counting who and where sources were used. The OP's source required me to pay, so I don't even know if I should count. Then I read this thread, and besides referencing my econ book to look things up (to verify) I saw no sources. Until zero caller.
Here is a summary of the important posts in this thread (w/ my commentary)
Now, the way I see it, what's currently taught in economics and finance classes in America is this concept of globalization, free market, capitalism, and less taxes/regulation = increased economic prosperity.
I want to go ahead and say that's crap.
First, one of the central tenets of modern capitalism is this concept that the "free" market leads to benefit for everyone. They think that things naturally move to an equilibrium in demand/supply/price if left alone. The rationale for this is that people, with enough info, are perfectly rational beings that make the best choices.
The problem with this theory is it doesn't account for the destructiveness of monopolies. In business, anytime a group has either grown or merged into a large enough economic body, they can start to implement destructive strategies like dumping a ton of their products at a very cheap price onto a foreign market and wrecking the local competition. This is validated by capitalism and the free market because this is merely a strategy to increase market share, and if they have the resources to engage in such an act, then they have every right to.
Over the span of a few years, this group demolishes the local competition and creates a monopoly. Then they jack up the prices a ton and win back all the profits they gave up with this strategy. Except once they've recouped their investment, they continue to do it perpetually. This is a win-lose scenario. Yet, it's an example of what happens on the "free" market. This doesn't lead to constant competition and cheaper prices/higher quality for everyone. This leads to a stagnant market where one giant is in control and sells at exorbitant prices because they are the controllers of all supply.
In capitalism, it's theorized that the only way to combat this is for another giant group to emerge. Yet, this sort of competition doesn't help at all. While the two giants are growing, they experience economies of scale and their efficiency increases. Yet, once they reach a certain size, they start to experience the DISeconomies of scale from being too bloated. But they have to continue this arms race, because if they try to scale back, the other one will have the advantage in buying power for that short window of time and can steal more market share, thus perpetuating an advantage until the guy who stepped back first is destroyed.
This creates an effect where giants are constantly forced to grow bigger to compete, even though in the long run it leads to a net loss in efficiency. This is what the free market creates.
The problems with this are obvious. This is why countries have effected protectionist policies to defend against these sorts of aggressive economic strategies. Then you no longer have a free market. It becomes mixed. Our world is full of mixed economies.
The last 30 years of economics in the USA and the world, is a constant attempt to try to bring down these protectionist strategies on the belief that free market was more efficient and beneficial for all. Peep the giant economic collapse we just had. It's pretty obvious to everyone now that this free market liberalization was a horrible idea. It destroyed local industries, it gutted nations, it destroyed whole swathes of industry in nations, and all it really did was lower the retail prices of goods.
What use are lower prices when you don't have a job?
That's the problem with the concept of free market. It's too focused on price of goods as a barometer for efficiency. It fails to address the issues of labor and wages. Now if you try to approach the labor market using capitalist and free market principles, you end up with sweatshops in China and India.
Does anyone honestly think it is a good thing to compete with sweatshop workers in terms of pay/productivity?
There is only one real way to improve labor's market value, which is training that improves their productivity. Yet, the sad truth of the matter is that even with a great education, a large proportion of the population is not that clever. They can't really be trained that far past the level of a sweatshop worker. This is what's traditionally known as "retail sector" or "blue collar."
This makes up a pretty large percentage of the world population. Yet, the blue collar workers in America don't want to work in sweat shop conditions. Capitalism and the free market tells us that the smart thing to do is just tell those blue collar workers to fuck off and move the factories to China.
This is why you see an increasing wealth disparity between the rich and poor in America. The poor have lost their jobs to the increasingly "free" labor market, whereas the rich and intelligent Americans have increased their value because they have some of the world's best education, coupled with some of the world's best tools of production.
AKA, the American factory worker must compete with the Chinese sweat shop worker.
The American Harvard graduate competes with the Chinese Beijing University graduate. Except the Harvard graduate gets to enter an organization like Goldman Sachs, with some of the world's best financial algorithms and the best financing and the best connections.
Therefore, while the free market has allowed the Harvard graduate to reach greater and greater heights by reaching the pinnacle of the financial world and reaping the benefits of competing vs the world due to massive, built-in advantages, the American factory worker has been laid off and can't find another job because he/she is now competing versus the 5 billion people of the developing world.
Do you guys see now why the free market is not helping the vast majority of America?
And if you look at the labor markets, the greatest shift has been away from manufacturing and towards retail. Yet it's a nonsensical shift. How does it make any sense when the retail industry is driven by consumption, and the consumption is paid for by wages from the retail industry?
This is like saying, I get a job at Gamestop. Then I buy a ton of games from Gamestop. Eventually, Gamestop will expand because I'm buying so many games with my wages from them, that Gamestop's sales will be enough to expand.
It makes no sense. Money is constantly being pulled OUT of the economy this way. Every time you put $50 through the system, you end up with less. First, I get the job at Gamestop. They pay me $50. Yet, I pay income tax on that $50. It then becomes $42.
This $42 is then spent to buy a game. Yet I need to supplement it with another $8 from somewhere. So, already I'm at -$8. Okay, $50 + tax = $53. Now I'm at -$11.
Then Gamestop gets their $50 and has to pay corporate tax on it. So they're down to what? $40? A net of $-21 for a single transaction between retail to employee and back to retail.
So, in every transaction of $50 of wages going out of the system, we end up with only $29 of it going back in. It's rather obvious that the US labor/wage market can not be sustained by this type of relationship.
The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.
The reason is because the tax dollars are being siphoned off. That $21 that was taken out is given to the government. Yet, the government we have today is increasingly controlled by corporations. According to current moral and economic philosophy, like that espoused by Jibba and others on TL, it's perfectly okay and constitutional for a corporation to get involved with government. On top of that, morals have no place in economic decisions. Therefore, it is completely okay for a corporation to try to pay to get laws passed that benefit the corporation.
What this means is that those $21 instead of going back into an industry that benefits the lower classes could be funneled into an industry that doesn't support hardly any of the middle-lower classes. Such as the banking industry! So, not only is the middle class losing jobs, competing with a vast number of foreign competitors, but they lose nearly half of every dollar to that mfing Harvard graduate. Because he/she is busy wheeling and dealing, screwed a bunch of people over with greedy "capitalist" ploys, and then needed a bailout.
This is how Main Street gets shafted.
On top of that, to the people who claim that of course the solution to all this is just get rid of taxes, I ask the question, ok, then where is the growth?
Sure, without taxes the $50 between me and Gamestop is cycled back and forth. Yet, that $50 will never grow. It remains $50. Therefore, even in the most ideal of circumstances, the money is not lost, it only remains the SAME. ZERO growth.
In fact, accounting for inflation, you'd still see a loss of $1-2 each year. The industry continues to lose in a perfectly ideal situation. This is why the concept of consumer-based society leading to growth is total bullshit. You cannot grow an economy by spending money. That doesn't work.
The only way to grow the economic pie is technological innovation which decreases the cost of production. This way, I spend $50, Gamestop gets their $50 back. Yet, they have factories/studios that can produce the game for only $5. Therefore, they pay me $50, I buy from them for $50, they get back $45. They can then afford to make 9 more games. With 9 more games, they can make enough money back to hire 8 more workers. This way the loop continues.
Except somewhere in the loop, the business decides that instead, they're just going to pay all those profits to the CEO. We don't need to increase that many jobs. We'll just give it to the top guys. Therefore, once again the middle and lower classes are powerless to stop the flight of money from the consumer-supplier loop.
In pretty much every way, using capitalist and free market principles leads to a loss for the middle and lower classes. This is why Sarkozy says capitalism needs to be refounded to be more moral. That finance, free trade, and competition are a MEANS not an end. And it needs to be redefined and reinvented.
It's because morons run around trying to claim that the free market leads to increased efficiency and prosperity for all as long as everyone just makes decisions in a totally selfish manner. It doesn't. It doesn't work. The past 30 years have shown it doesn't work. It's led to disaster. The globalization and free market proponents were wrong. They did nothing but justify selfishness as a good thing.
your initial post had a little internet in you, and it never quite left. but I agree with what you say + Show Spoiler +
On January 28 2010 06:12 Caller wrote: I'm done with this thread. It's basically a shorter version of the Shock Doctrine with no facts or evidence, cherrypicked or not. When you claim you want to debate something and then proceed to claim that your arguments are watered down for general consumption, you clearly are looking only to entice people that are like ron paul fans or w/e that tend to be more easily-picked apart views when it comes to economical issues.
On January 28 2010 07:18 EmeraldSparks wrote: I love TL threads about economics.
They make me feel warm and fuzzy inside.
monster post. a monster with manners and a brain + Show Spoiler +
On January 28 2010 09:25 ZeroJumps wrote: First, Hi! I have followed the TeamLiquid forums for a while now, but have thus far avoided posting. This thread, however, merits special attention.
It's a provocative title I know. But it's exactly what I want to debate.
Not just because the opening post is lacking in specificity and riddled with errors, but also because the majority of responses have been mere echoes of assent. Its a provocative opening, I know. But it’s exactly what I want to debate.
To start things off I'd like to open with the latest address by President Sarkozy of France: Globalization Got Out of Control
It’s difficult to believe that one would ever see an argument in favor of globalization and capitalism coming out from Sarkozy. Over the last few decades, France has seen significant cultural, social, and economic unrest among its population due to increasing number of immigrants, particularly those from Eastern Europe and the Middle East. I suspect if Sarkozy was seen to be advocating for greater globalization, he would soon be out of a job. This isn’t to say that his points should be discounted, but rather just that one should recognize his likely biases.
Now, the way I see it, what's currently taught in economics and finance classes in America is this concept of globalization, free market, capitalism, and less taxes/regulation = increased economic prosperity.
I want to go ahead and say that's crap.
And I’m going to go ahead and say that you’re wrong. (This isn’t meant to spark a flame-war, but rather to announce my intention to debate the rest of your post)
To begin, you will need to be a little more specific in your terminology. What do you mean when you say “free-market”, and less “taxes and regulation”? Are you talking about capital gains taxes, income taxes, or taxes in general? Do you mean less regulation on business? Or less regulation on capital and labor flows? One last point on this paragraph, and that is to say, as written, it is mostly correct. However, it should be noted that the predicted increase in economic prosperity is never immediate, nor does it imply that there will not be losers among certain segments of the population. Rather, increased economic prosperity is viewed in the aggregate, or the sum of the entire population.
First, one of the central tenets of modern capitalism is this concept that the "free" market leads to benefit for everyone. They think that things naturally move to an equilibrium in demand/supply/price if left alone. The rationale for this is that people, with enough info, are perfectly rational beings that make the best choices
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This is true if one is considering only the most basic or unrealistic economic models. I’m not entirely sure what you mean by “if left alone”, but I’ll take it to mean zero regulation, no taxes, and complete freedom in the movement of capital and labor. Also, I think you will find that every market, no matter how regulated or restricted, reaches some kind of equilibrium. I think what you meant to say is that economists believe the market will reach a perfectly competitive equilibrium, where you have many identical firms producing a given good at where price is equal to marginal cost.
While some models do predict a perfectly competitive equilibrium from these things (and often only because they simply don’t include measures of them), I don’t think you could find a serious economist who believes such an equilibrium would result. As an aside, that kind of world is essentially anarchistic, and it is difficult to imagine any sort of nation-state even existing, let alone trading.
The problem with this theory is it doesn't account for the destructiveness of monopolies
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Which theory? Please be more specific. There are many economic models which do, in fact, account for the “destructiveness” of monopolies. Some kinds of monopolies also argue against your belief that economists always believe less regulation is a good thing. There are many situations where a regulated monopoly is the most desirable option. Any industry with high fixed costs and low marginal costs is well suited to allowing such a monopoly to exist, such as electric companies and telephone companies. (Imagine if there were many electric companies, and each had to lay their own power lines!) You are right that such monopolies could be “destructive” if they weren’t regulated, but my point here is that even “free market” economists see the value in certain kinds of regulation.
In business, anytime a group has either grown or merged into a large enough economic body, they can start to implement destructive strategies like dumping a ton of their products at a very cheap price onto a foreign market and wrecking the local competition. This is validated by capitalism and the free market because this is merely a strategy to increase market share, and if they have the resources to engage in such an act, then they have every right to. Over the span of a few years, this group demolishes the local competition and creates a monopoly. Then they jack up the prices a ton and win back all the profits they gave up with this strategy. Except once they've recouped their investment, they continue to do it perpetually. This is a win-lose scenario. Yet, it's an example of what happens on the "free" market. This doesn't lead to constant competition and cheaper prices/higher quality for everyone. This leads to a stagnant market where one giant is in control and sells at exorbitant prices because they are the controllers of all supply.
I’ll begin by saying that many countries do indeed have anti-dumping laws to protect against just that. But such laws are foolhardy. Your assessment lumps together two distinct kinds of dumping.
The situation you’re describing is one in which a company prices their goods such that price is less than marginal cost, meaning they take a loss on every item sold (a.k.a. several recent game consoles). Such maneuvers can often result in other companies being forced out (note, however, that this is not limited to international competition). However, such behavior is not economically viable in the long run. As you say, prices must eventually go up. The extent to which people are willing to pay premiums above which they originally paid however, is limited by the elasticity of demand for that good. No one is going to pay $12 for a nail when they can buy a screw instead for $.01. Furthermore, once the company raises prices to above price equals marginal cost, it opens the door for competition to once again enter the market.
The second situation is one in which the company prices their goods below the prices of other similar goods in the area, but at a price above marginal cost. This is a perfect example of specialization. If one company or country can make a profit by selling their goods at a lower price than another, then that company or country should specialize in the making of that good. Certainly, there will be some negative elements involved, such as workers of the higher-priced company being laid off, but the net gain to society more than compensates for that loss. Although this gain is most often considered in terms of lower prices, consider that lower prices result in increased profits of other companies, allowing them to expand and create new jobs.
In capitalism, it's theorized that the only way to combat this is for another giant group to emerge. Yet, this sort of competition doesn't help at all. While the two giants are growing, they experience economies of scale and their efficiency increases. Yet, once they reach a certain size, they start to experience the DISeconomies of scale from being too bloated. But they have to continue this arms race, because if they try to scale back, the other one will have the advantage in buying power for that short window of time and can steal more market share, thus perpetuating an advantage until the guy who stepped back first is destroyed.
What? This sounds like something you didn’t think through properly. Did you have a specific example in mind here? What does it mean to have “an advantage in buying power”? What do you mean by “scale back”? I also think you are confused about the nature and importance of market share. For the sake of argument, however, this is how I will take this paragraph: Both companies are too large. Thus, the price of their goods has risen (due to operating inefficiencies perhaps). One company recognizes this, and reins in their production (perhaps closing several production plants or store outlets). The other does not. By not doing so, the inefficient company gains an advantage over the efficient company (perhaps because they have more production plants relative to the other company now), and uses that inefficiency to eliminate the other company. The problem with that is that the first company is, by definition, inefficient. It cannot gain an advantage over the other company. How could it? The other company will produce the same good, but for a lower price. I think perhaps you believe market share to exhibit some kind of snowball effect, whereby once you achieve the largest market share, then you automatically eliminate the competition. Perhaps I have misunderstood you, but such behavior is not predicted in economic theory, nor is it seen in the real world. In the case you described, the inefficient company has no choice but to follow suit.
This creates an effect where giants are constantly forced to grow bigger to compete
This is misattributing cause and effect. Companies don’t grow bigger so that they can compete, companies grow bigger because they are competitive. Walmart didn’t just decide to become a national chain so that they could be competitive. They became a national chain because they were competitive. At the risk of being too repetitive, companies rarely ever grow bigger unless they are efficient.
even though in the long run it leads to a net loss in efficiency. This is what the free market creates.
My previous statement makes this false. The most successful companies are the most efficient. This makes intuitive sense. You don’t see large, successful companies that are inefficient. (Unless you count the US government as successful, but that’s beside the point )
The problems with this are obvious. This is why countries have effected protectionist policies to defend against these sorts of aggressive economic strategies. Then you no longer have a free market. It becomes mixed. Our world is full of mixed economies.
Since your earlier statements were not true, the problems with this are not obvious (sorry if this seems too confrontational, it is the way my mind proceeds when I attempt to make an argument). You are right that countries have created protectionist policies to defend against domestic problems resulting from international trade. But those policies are always misguided. Why do they create them? Because the advantages gained from trade are much more difficult to see than the losses. A reduction in the price of nails from $.02 to $.01 as a result of trade saves millions, if not billions, of dollars per year. But no single company sees that entire picture. But the workers in the U.S. who make nails and got laid off are highly visible. They write to their congressional delegation. They appear in the newspaper and on television. Yet the sum of their wages might not even total a million dollars per year. Even though the net gain is much higher, it is not as noticeable.
The last 30 years of economics in the USA and the world, is a constant attempt to try to bring down these protectionist strategies on the belief that free market was more efficient and beneficial for all. Peep the giant economic collapse we just had. It's pretty obvious to everyone now that this free market liberalization was a horrible idea. It destroyed local industries, it gutted nations, it destroyed whole swathes of industry in nations, and all it really did was lower the retail prices of goods.
As another previous post said, this seems like nothing more than a populist outcry. Blaming the economic collapse on efforts to bring down protectionist barriers does not make sense. I fail to see how trade tariffs, immigration restrictions, and limits on international capital flows have anything to do with banking regulation. Capital flows and capital gains taxation are in the realm of banking, but are not themselves causal agents in the collapse.
That's the problem with the concept of free market. It's too focused on price of goods as a barometer for efficiency. It fails to address the issues of labor and wages. Now if you try to approach the labor market using capitalist and free market principles, you end up with sweatshops in China and India.
I think the price of goods is an excellent barometer for efficiency. While I believe using it as a measure does neglect many important other things, such as happiness or environmental concerns, the one aspect it does excel at is to provide a measure for labor and wages. Wages mean nothing with a price to compare them to. $1 a day will buy one nothing now, but 100 years ago? Similarly, a wage is nothing more than the price of labor. Perhaps you meant that the focus of companies on the price of goods prevents them from paying adequate attention to the needs of their workers. (I think this is, after rereading your paragraph, how you meant it). Sweatshops are an oft-cited example of “evil corporations” that exploit people. I typically associate this kind of statement with people who have never been outside of first-world countries, or experienced true poverty. Not poverty as defined by the US ($22,000 for a family of four), but poverty of the kind where people earn less than a $1 a day. In such situations, a job at a sweatshop is almost a miracle. The alternative to such jobs in poor countries is frequently to not know if or when you will eat again. People living in developed countries often forget how terrible situations can be elsewhere. A common counter-argument to this is “Well, why don’t companies just pay them as much as they pay their American workers?” There are many answers to this. The best is probably that the labor pool is just too large. The United States makes up a but a tiny fraction of the world’s population. For every child in Egypt making shoes for $2 a day, there are a hundred more who would be willing and happy to do it for $1 a day. A second is that, if they did, there would be no incentive to hire workers abroad. All it would do is increase the costs of their goods, as they would need to be shipped further.
Does anyone honestly think it is a good thing to compete with sweatshop workers in terms of pay/productivity?
There is a reason manufacturing industries are declining in the United States. Does anyone honestly think this is a bad thing? American wages have been increasingly consistently over the last...250 years. Unemployment has stayed all but constant, and far lower than almost any other country on the planet. This suggests that the positive effects from structural changes in the economy, such as the shift from a manufacturing based economy to service based economy, far outweigh the negative.
There is a common story told about such shifts: Everyone used to worry that robots would take over all of the manufacturing jobs, and then there would be massive unemployment. Except, when the robots took over, the unemployment spike didn’t happen. Why? Because people were needed to build, operate, and maintain the robots.
Countries specialize in the things they are best at. The United States used to be among the best manufacturers in the world. So there were many manufacturing jobs. Now, as our standard of living, our productivity, and educational attainment have all increased, we are no longer the best at manufacturing. We still might be able to produce more per person than another country if we focused on manufacturing, due to our infrastructure and technology, but what would be the point? Instead, we move onward and upward into a service-based economy.
There is only one real way to improve labor's market value, which is training that improves their productivity. Yet, the sad truth of the matter is that even with a great education, a large proportion of the population is not that clever. They can't really be trained that far past the level of a sweatshop worker. This is what's traditionally known as "retail sector" or "blue collar."
The first sentence is more or less correct, though it neglects the role of technology. I agree that the intelligence of the average person of the United States is “not that clever”. But, again, go outside of the first-world. The literacy rate in the US is close to 100%, and almost every student attends some high school. While poor countries have made great strides in recent years (thanks to globalization. . .), almost 100 still have literacy rates below 80%.
This makes up a pretty large percentage of the world population. Yet, the blue collar workers in America don't want to work in sweat shop conditions. Capitalism and the free market tells us that the smart thing to do is just tell those blue collar workers to fuck off and move the factories to China.
And this is a problem because? I understand that, given the current unemployment rate, and given how the recession has disproportionately effected men in manufacturing, that such a response seems callous. That’s because it is, in the short term.
This is why you see an increasing wealth disparity between the rich and poor in America. The poor have lost their jobs to the increasingly "free" labor market,
Is it? Does $30,000 a year for a factory worker job narrow the wealth disparity between the rich and the poor? No, it does not.
whereas the rich and intelligent Americans have increased their value because they have some of the world's best education, coupled with some of the world's best tools of production
AKA, the American factory worker must compete with the Chinese sweat shop worker.
I just want to point out here that the standard of living and the wage level for all income groups has being increasing in America since its founding. It isn’t that the poor are getting poorer and the rich richer, it is that the rich are getting richer faster than the poor are getting richer.
The American Harvard graduate competes with the Chinese Beijing University graduate. Except the Harvard graduate gets to enter an organization like Goldman Sachs, with some of the world's best financial algorithms and the best financing and the best connections.
I think you meant: The American Harvard graduate competes with the Chinese Harvard graduate. And that is one the best thing about having less protectionism. With more freedom of movement for labor and capital, the best and brightest in other countries are allowed to make use of the top schools in the world.
Therefore, while the free market has allowed the Harvard graduate to reach greater and greater heights by reaching the pinnacle of the financial world and reaping the benefits of competing vs the world due to massive, built-in advantages, the American factory worker has been laid off and can't find another job because he/she is now competing versus the 5 billion people of the developing world.
Right. But again, this is a short term loss for a much greater long term gain. Think about the industrial revolution. It was essentially the same, except that instead of services replacing manufacturing, manufacturing replaced agriculture. Does anyone (other than dirty hippies) think America is worse off for having undergone that transformation?
Do you guys see now why the free market is not helping the vast majority of America?
To go back to the linkage between prices and wages: you don’t see how it is helping because you simply don’t notice it. When you go grocery shopping, do you stop to think, “My grocery bill this week was $100 less this week because of free trade”? Free trade results in a purchasing power increase of tens-of-thousands of dollars every year for each and every person in the United States. That is not an exaggeration. Consider how many goods you buy every year, and then realize that anything not made in the United States is cheaper than it would be otherwise. Even goods made in the United States, such as strawberries from California, are cheaper because they have to compete with Mexico. And, if that’s not enough, consider that you even have the option to buy strawberries in January. All because of free trade.
And if you look at the labor markets, the greatest shift has been away from manufacturing and towards retail. Yet it's a nonsensical shift. How does it make any sense when the retail industry is driven by consumption, and the consumption is paid for by wages from the retail industry?
Are you asking how can goods continue to be produced in a country if no one is actually making goods?
This is like saying, I get a job at Gamestop. Then I buy a ton of games from Gamestop. Eventually, Gamestop will expand because I'm buying so many games with my wages from them, that Gamestop's sales will be enough to expand.
It makes no sense. Money is constantly being pulled OUT of the economy this way. Every time you put $50 through the system, you end up with less. First, I get the job at Gamestop. They pay me $50. Yet, I pay income tax on that $50. It then becomes $42.
This $42 is then spent to buy a game. Yet I need to supplement it with another $8 from somewhere. So, already I'm at -$8. Okay, $50 + tax = $53. Now I'm at -$11.
Then Gamestop gets their $50 and has to pay corporate tax on it. So they're down to what? $40? A net of $-21 for a single transaction between retail to employee and back to retail.
So, in every transaction of $50 of wages going out of the system, we end up with only $29 of it going back in. It's rather obvious that the US labor/wage market can not be sustained by this type of relationship.
I don’t really know what to make of this. It almost seems like you see tax money as being removed from the system.
The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.
The reason is because the tax dollars are being siphoned off. That $21 that was taken out is given to the government.
Right. You do see taxed dollars as just vanishing. Let me redo your gamestop example (keeping it simple):
You work at gamestop. You get paid $100. Income tax takes 20%. You now have $80. You buy a game for $50, with $5 of sales tax. Now, gamestop has -$50 (the game – your income). You have $25. The government has $25. The government uses that $25 to buy concrete an pay a worker to repair the pothole in your street. Now that worker has $25. Now he buys a game from gamestop. Which fuels your next paycheck.
Economies are vast. Money changes hands very frequently. Money doesn’t just disappear from the system.
Yet, the government we have today is increasingly controlled by corporations. According to current moral and economic philosophy, like that espoused by Jibba and others on TL, it's perfectly okay and constitutional for a corporation to get involved with government. On top of that, morals have no place in economic decisions. Therefore, it is completely okay for a corporation to try to pay to get laws passed that benefit the corporation.
This reads like a conspiracy theory website. I can’t argue that corporations don’t heavily influence politics. But, two points to consider: first, the United States has one of the highest capital gains tax rates in the world. This is extremely detrimental to business. Second, income tax is progressive. Larger corporations pay more in taxes. One would think that, if corporations really had significant influence, these items in particular would be among the first to change.
What this means is that those $21 instead of going back into an industry that benefits the lower classes could be funneled into an industry that doesn't support hardly any of the middle-lower classes. Such as the banking industry! So, not only is the middle class losing jobs, competing with a vast number of foreign competitors, but they lose nearly half of every dollar to that mfing Harvard graduate. Because he/she is busy wheeling and dealing, screwed a bunch of people over with greedy "capitalist" ploys, and then needed a bailout.
I realize that writing quality goes down the longer one writes (witness my own comments), but there really isn’t anything of substance in here. I guess I’ll just point out recent income tax statistics: (google IRS summary of Federal Individual Income Tax Data 2007 or 2008 for source) In 2007, The top 1% of income earners paid 40% of total income tax. The top 50% of income earners paid 97% of total income tax. In other words, of that $21 dollars in taxes, $20.50 of it came from the wealthy. I find it hard to make an argument that taxation is hurting the poor.
On top of that, to the people who claim that of course the solution to all this is just get rid of taxes, I ask the question, ok, then where is the growth?
Sure, without taxes the $50 between me and Gamestop is cycled back and forth. Yet, that $50 will never grow. It remains $50. Therefore, even in the most ideal of circumstances, the money is not lost, it only remains the SAME. ZERO growth.
In fact, accounting for inflation, you'd still see a loss of $1-2 each year. The industry continues to lose in a perfectly ideal situation. This is why the concept of consumer-based society leading to growth is total bullshit. You cannot grow an economy by spending money. That doesn't work.
We don’t have a consumer based economy. We are moving toward a service based economy.
The only way to grow the economic pie is technological innovation which decreases the cost of production. This way, I spend $50, Gamestop gets their $50 back. Yet, they have factories/studios that can produce the game for only $5. Therefore, they pay me $50, I buy from them for $50, they get back $45. They can then afford to make 9 more games. With 9 more games, they can make enough money back to hire 8 more workers. This way the loop continues.
Except somewhere in the loop, the business decides that instead, they're just going to pay all those profits to the CEO. We don't need to increase that many jobs. We'll just give it to the top guys. Therefore, once again the middle and lower classes are powerless to stop the flight of money from the consumer-supplier loop.
Technological innovation is certainly a good thing. It reduces prices. But so does shifting labor to another country. Perhaps another example: Say they fire you because they don’t need you making the game anymore, because they hired a worker in another country. Since they can now make games cheaper, they make more profit, enabling them to expand. You get rehired as architect to design their new buildings. Now instead of being in manufacturing, you’re an architect. (Think about this on a national level, not on an individual level)
In pretty much every way, using capitalist and free market principles leads to a loss for the middle and lower classes. This is why Sarkozy says capitalism needs to be refounded to be more moral. That finance, free trade, and competition are a MEANS not an end. And it needs to be redefined and reinvented.
Remember what I said about Sarkozy’s likely biases and political pressures?
It's because morons run around trying to claim that the free market leads to increased efficiency and prosperity for all as long as everyone just makes decisions in a totally selfish manner. It doesn't. It doesn't work. The past 30 years have shown it doesn't work. It's led to disaster. The globalization and free market proponents were wrong. They did nothing but justify selfishness as a good thing.
There isn’t really anything to respond to here. I would be happy to argue with you some more, if you would like. You said you were familiar with economic concepts in a previous post. Maybe we can break out our favorite international macro or international trade models.
Thanks for reading!
Now, ladies and gentlemen, witness something rarely seen on the internet (in the bold): + Show Spoiler +
On January 28 2010 14:02 StorkHwaiting wrote: To Zero:
Thanks for the lengthy response and your time and effort are much appreciated
1. By taxes I mean things like tax write-offs by corporations through giving to charities/NPOs that end up looping right back to the corporations, the evasion of corporate taxes by giving out huge bonuses to their executives so they can post them as operating expenses, the constant tax cuts on capital gains, and the increasingly labrynthine ways that the top tax bracket finds to evade paying their actual taxes. There are of course a great deal more, but in essence I think the problem stems from corporations and the highest income brackets consistently avoiding taxes through tax lawyers and armies of accountants, while the middle and lower class can't afford these kinds of resources to avoid paying their taxes.
On regulation, I think the most important aspect is the lack of regulation on capital AND labor flows.
2. You're right that serious economists do not posit this theory. The problem is the political rhetoric in America for the last 30 years HAS been positing this theory. If you look at the political activity, it's been repeal after repeal of regulations, while using this theory of perfect equilibrium and efficiency as their rationale.
3. I should have been more clear. I am talking about the political rhetoric in America and the movement toward globalization and deregulation that has been implemented in the political arena of America. OFC economists have accounted for everything under the sun. There are tons of economists out there postulating pretty much every possible permutation I could think of. I don't mean to say the entire field of economics and capitalism is wrong or stupid. What I mean is the political will of America has been trending towards deregulation, free markets, and the flow of capital and labor out of America (labor more than capital).
4. On dumping, what I'm talking about is the first situation, but also a third situation that wasn't mentioned. The third situation is that a government subsidized industry, like agriculture, is able to grow products at a loss, remain profitable due to subsidies, AND dump their excess product on a foreign market, thereby glutting it and ruining the livelihood of local producers. Take for instance what American dumping of goods has done to Haiti's native farmers.
Also, with the first situation, there is a window of time between monopoly and reentry in the market by a competitor. It's a rare situation in which the competitor reenters and immediately takes an aggressive percentage of market share. There is some significant lag time involved and that's why a lot of times a monopolizing entity can play this juggling game of hiking up prices and then dropping them again to squeeze out any legitimate threat, while skimming hefty profits in the back and forth adjustments. Also, over time, many competitors would see this as an industry with significant barriers to entry and high risk knowing that this monopolizing entity will just drop prices when they try to enter the market. It deters competition from ever entering.
5. On the giants issue, I was thinking more in terms of banking. Whereby the bank with more deposits has a significant advantage over a smaller bank, solely because they have more capital and thereby a great advantage in competing. Sort of like holding the most chips at a poker table. It doesn't guarantee a victory but it is definitely an advantage.
You are right in that this is probably a bad example to use for every industry as it does not apply to all of them and in many cases, the more efficient one would force the other one to scale back.
6. I blame the economic collapse more on a combination of factors including deregulation, but I should have been more specific here. And in retrospect, you are right, this was a poorly constructed OP. What I should have said was that deregulation as a political rhetoric and disposition was one of the leading factors of this economic crisis. This is why I think so:
The monetary policy engineered by Greenspan was extremely loose. The political rhetoric of the time was that deregulation of banking was a good thing. This led to a very low cost of borrowing, AKA money is cheap. This environment of cheap money combined with the repeal of laws banning ARMs and loans of that nature led to the bubble in the housing market and ridiculous overexposure in the banking industry.
So yes, in the end, I blame banking regulation, but inherent in that argument is the belief that less regulation is a good thing.
7. Again, I should have been more clear on this point. What I mean is that this a net loss in jobs for the American labor market. And yes, I'd say this is a protectionist sentiment. The corporations say that this is a good thing because the price of goods is cheaper. Yet, if Americans lose jobs and get cheaper goods, what do we end up with? A guy who makes $0 a day is not going to care if sneakers are $20 instead of $45.
My worry when it comes to manufacturing is that, yes there are people needed to maintain the robots, machines, etc but over time I think that number has decreased. Also, these jobs require more and more skilled labor. I'm wondering if these jobs will someday reach a threshold in which only the top 30% of the population are able to even perform them. What would the other 70% of America do then? But maybe this is an irrational fear. Technology is supposed to make things easier.
8. Good point. I would agree that the income gap is materializing because of the accelerated growth among the rich, rather than a drastic decrease in the growth of the poor.
9. I agree that this is exactly the same parallel. In the past agriculture was replaced by manufacture. And now manufacture has been replaced by the service sector. But I wonder if the service sector is truly an adequate replacement for manufacture. Perhaps I am too ignorant of what the service sector entails or how it perpetuates its own growth, but as of now, I have sincere worries about the sustainability of America becoming a predominantely service-sector based economy. I would love to hear your thoughts on this.
10. About money disappearing. When the US uses that money to launch a missile at Afghanistan, I see that money as disappeared. When the US gives that money to some contractor who installs a toilet for $1,000 I see that as disappeared. When the US takes that tax money and shoves it into Fannie Mae to buy up toxic loans, I see that money as disappeared. While spending on infrastructure would be fantastic, I don't see a lot of the tax money being spent that way. Instead, I see corporate interests directing government spending into channels that don't return to the consumer.
11. Your numbers are correct. But the wealthy used to pay even MORE than this. And I think they should pay more.
Anyhow, hope the numbering I did wasn't too confusing. I'm not good with quotes so I didn't want to go in and try to respond to each quoted block of text. Thanks again for responding and I will admit that you proved me wrong or showed that I needed to more greatly clarify on a number of points.
Still, I hold serious doubts about the virtues of shifting to a service based economy and whether that is truly beneficial for the people.
Also, I hold serious doubts about the fiscal policy of the US government.
I also hold serious doubts about the way taxation of corporations are handled.
But most of all I have serious doubts about capital and labor flows. While it is easy to say that everyone will move into the service sector and be happy, I've yet to see the service sector actually provide enough jobs to replace all the ones lost in agriculture and manufacture.
Graciousness. On the internet. mad props, storkhwaiting & zero caller. I will read any more discussion threads you make and contribute if I actually know what I'm talking about.
All the important posts after this are discussions not relevant to the main post, but discuss good sources from which to further learning.
There was one last post that I don't feel like finding, but it said (paraphrased) "everybody who goes to school gets brainwashed." lol...no. Especially with economics, most things don't make intuitive sense unless thoroughly investigated.
I sourced my posts. It is quite remarkable that you glossed over my contributions.
The state doesn't have perfect information either... in fact they have a lesser incentive to, because the business to which they attend are not their own, but of others they may never meet or come face to face with.
May I propose that the question should be not "whether you can make the right choices?" but "who has the best incentives to make the right choices?" plus "right choices for who?"
No, the state doesn't, but it will usually have much better information than an individual. Incentives play no role in this as "right choices" are 1. Opinion based, unless you're talking of economically efficient being the right choice, but that completely disregards morality. 2. Relies upon the assumption there are choices available. 3. Relies upon that the option of a "right choice" is available. Which, often times, there isn't. Without perfect information, or at least even DECENT information, no right choice is forseeable.
Now, let us add a new number into my hypothesis above. Suppose the "right amount" or "equilibrium price" was $50,000. How could the patient EVER get to that price if each doctor charges him $500,000+ or nothing, and he doesn't have the information to offer $50,000? How can he argue against the doctors without sufficient medical knowledge?
Wait... who says what the equilibrium price is? IMO there is no equilibrium price (there is no spoon luls).. I think if you're really interested about the aspects of trade you should study uh catallactics.
The state has *no way* of knowing how much *you* value anything because that which you value can only be known after-the-fact, only after you buy something or perhaps even assert your wish to buy something for a certain cost do we know that you value the "something" more than the "cost" (in dollars if it may be)
A trade is made because both parties value the objects being traded differently! Can we agree on <--- that?
Equilibrium price is the price determined by the market given a supply and demand schedule which is the aggregate of people's personal demands and the suppliers personal well, supplies. But fair enough if you do not believe in an equilibrium price. And no, the state really doesn't. That's a problem with it, and the problem with the market is lack of perfect information. Thus, we can't really say one is the best, only that in certain circumstances, one is preferred over another. =/ Yes, I agree with that assumption. Sorry if I'm frustrating you.
Naw it's not frustrating, I like teaching and being taught, that's what we be doing here I hope. Maybe I was too harsh on saying that an equilibrium price doesn't exist. Well it certainly doesn't exist somewhere in reality, like.. objectively. But an equilibrium price would be only an approximation to that which you find other peoples evaluations to be at. Like.. there's no exact price, it's only approximations.. because even at the lowest common denominator, the individual, their values are also constantly changing... so.. there certainly can't be an exact price even if we were all to have our heads scanned and analyzed by some really good keynesian.
I don't see lack of perfect information as a "problem with the market" .. well, it's as much of a problem as "people can't fly" or "move through walls" if you know what I mean.
Haha, that's very true. It is very interesting to learn through conversation and civil debate. ^_^ That point, I agree on. An equilibrium price, as far as I'm concerned, is an ideal. Much like infinity,you can get the idea, but to reach it is incredibly difficult. Nonetheless, to have the idea there as an indicator is still useful, much like how the concept of infinity is useful in mathematics.
Hmm, well, I highly disagree on that point. =/ See, the market works because there is a struggle between two forces, both of which are trying to do the best for their own good, to make a mutually beneficial choice. I think of it much like a court room, where two sides battle it out to find the truth of the matter. However, if one side suddenly doesn't have a crucial witness, or piece of information, the system falls apart. =(
Define "fall apart". Certainly one would come up on top in that case but the fact that there was a conference in the first place shows you that these people were willing to engage in their dispute civilly and adhere to the jury or judge's decision!
Well, by fall apart, I meant that the point of the trial failed. Sure, something the trial happened, but see, that's not the point of the trial. The point of the trial is to find the truth, to make sure justice comes out on top. However, with insufficient information, we do not know whether or not the correct verdict was chosen.
Also, Moral Hazard applies to everything, not just the state. It is not, by definition, caused by the state. In fact, it applies to people as well. If you get insurance, you're more likely to drive more recklessly. =/ Stuff like that.
Hmm... the point of the trial was to find the truth? Maybe for the verdict.. but past that, it also comes down to what the sentence should be, those being gray areas of punishment and retribution.. There is no truth to be sought at that point (unless you're a very hardcore moral objectivist) but really, only disputes to be settled in a way thats good for the court's clients, some ruling that they abide by and approve of. That's not being limited to the prosecution and the defense but also any future clients. edit: forgot to quote
Hmm, true. But here, the dispute can be settled by either the judge or the jury here, which, interestingly enough, completely kills my model. Also, stryker provides very good arguments which I cannot answer at the moment. So yes, thinking time... =/
Its k.
On January 29 2010 12:52 KurtistheTurtle wrote: There was one last post that I don't feel like finding, but it said (paraphrased) "everybody who goes to school gets brainwashed." lol...no. Especially with economics, most things don't make intuitive sense unless thoroughly investigated.
I disagree, praxeology (from mises, from austrian economics) makes a bunch of intuitive sense at least for me. Man acts, and man chooses the means which are best for his ends makes a lot of intuitive sense... Value is subjective, marginal value, capital theory.. all follows from that... I think the only true counter to austrian economics is that man sometimes chooses that which isn't best for him, or is contradictory, stupid, etc. and therefore we need divine beings aka government to lead us in the right direction. Animal spirits, fuck yeah, nice argument it is.
I will again emphasize the danger of economics theory as a science. People should stop thinking of statistics based economics theory as a science.
Science is testable, replicable, and produced through experiment. Statistics based economics is not. Rather it is often a pattern fitted to a set of data, that all too often is statistically too small a sample size.
No, the state doesn't, but it will usually have much better information than an individual. Incentives play no role in this as "right choices" are 1. Opinion based, unless you're talking of economically efficient being the right choice, but that completely disregards morality. 2. Relies upon the assumption there are choices available. 3. Relies upon that the option of a "right choice" is available. Which, often times, there isn't. Without perfect information, or at least even DECENT information, no right choice is forseeable.
Now, let us add a new number into my hypothesis above. Suppose the "right amount" or "equilibrium price" was $50,000. How could the patient EVER get to that price if each doctor charges him $500,000+ or nothing, and he doesn't have the information to offer $50,000? How can he argue against the doctors without sufficient medical knowledge?
Wait... who says what the equilibrium price is? IMO there is no equilibrium price (there is no spoon luls).. I think if you're really interested about the aspects of trade you should study uh catallactics.
The state has *no way* of knowing how much *you* value anything because that which you value can only be known after-the-fact, only after you buy something or perhaps even assert your wish to buy something for a certain cost do we know that you value the "something" more than the "cost" (in dollars if it may be)
A trade is made because both parties value the objects being traded differently! Can we agree on <--- that?
Equilibrium price is the price determined by the market given a supply and demand schedule which is the aggregate of people's personal demands and the suppliers personal well, supplies. But fair enough if you do not believe in an equilibrium price. And no, the state really doesn't. That's a problem with it, and the problem with the market is lack of perfect information. Thus, we can't really say one is the best, only that in certain circumstances, one is preferred over another. =/ Yes, I agree with that assumption. Sorry if I'm frustrating you.
Naw it's not frustrating, I like teaching and being taught, that's what we be doing here I hope. Maybe I was too harsh on saying that an equilibrium price doesn't exist. Well it certainly doesn't exist somewhere in reality, like.. objectively. But an equilibrium price would be only an approximation to that which you find other peoples evaluations to be at. Like.. there's no exact price, it's only approximations.. because even at the lowest common denominator, the individual, their values are also constantly changing... so.. there certainly can't be an exact price even if we were all to have our heads scanned and analyzed by some really good keynesian.
I don't see lack of perfect information as a "problem with the market" .. well, it's as much of a problem as "people can't fly" or "move through walls" if you know what I mean.
Haha, that's very true. It is very interesting to learn through conversation and civil debate. ^_^ That point, I agree on. An equilibrium price, as far as I'm concerned, is an ideal. Much like infinity,you can get the idea, but to reach it is incredibly difficult. Nonetheless, to have the idea there as an indicator is still useful, much like how the concept of infinity is useful in mathematics.
Hmm, well, I highly disagree on that point. =/ See, the market works because there is a struggle between two forces, both of which are trying to do the best for their own good, to make a mutually beneficial choice. I think of it much like a court room, where two sides battle it out to find the truth of the matter. However, if one side suddenly doesn't have a crucial witness, or piece of information, the system falls apart. =(
Define "fall apart". Certainly one would come up on top in that case but the fact that there was a conference in the first place shows you that these people were willing to engage in their dispute civilly and adhere to the jury or judge's decision!
Well, by fall apart, I meant that the point of the trial failed. Sure, something the trial happened, but see, that's not the point of the trial. The point of the trial is to find the truth, to make sure justice comes out on top. However, with insufficient information, we do not know whether or not the correct verdict was chosen.
Also, Moral Hazard applies to everything, not just the state. It is not, by definition, caused by the state. In fact, it applies to people as well. If you get insurance, you're more likely to drive more recklessly. =/ Stuff like that.
Hmm... the point of the trial was to find the truth? Maybe for the verdict.. but past that, it also comes down to what the sentence should be, those being gray areas of punishment and retribution.. There is no truth to be sought at that point (unless you're a very hardcore moral objectivist) but really, only disputes to be settled in a way thats good for the court's clients, some ruling that they abide by and approve of. That's not being limited to the prosecution and the defense but also any future clients. edit: forgot to quote
Hmm, true. But here, the dispute can be settled by either the judge or the jury here, which, interestingly enough, completely kills my model. Also, stryker provides very good arguments which I cannot answer at the moment. So yes, thinking time... =/
On January 29 2010 12:52 KurtistheTurtle wrote: There was one last post that I don't feel like finding, but it said (paraphrased) "everybody who goes to school gets brainwashed." lol...no. Especially with economics, most things don't make intuitive sense unless thoroughly investigated.
I disagree, praxeology (from mises, from austrian economics) makes a bunch of intuitive sense at least for me. Man acts, and man chooses the means which are best for his ends makes a lot of intuitive sense... Value is subjective, marginal value, capital theory.. all follows from that... I think the only true counter to austrian economics is that man sometimes chooses that which isn't best for him, or is contradictory, stupid, etc. and therefore we need divine beings aka government to lead us in the right direction. Animal spirits, fuck yeah, nice argument it is.
I always laugh about animal spirits and we are all dead in the long run. This is the man's theories he used for Economics. I mean, the next thing you know we'll re-enact destroying resources circa 1933 which flies in the face of the Broken Window Fallacy which is a logical economic fact, aka axiomatic or a priorism (praxeology).
On January 29 2010 13:03 lixlix wrote: I will again emphasize the danger of economics theory as a science. People should stop thinking of statistics based economics theory as a science.
Science is testable, replicable, and produced through experiment. Statistics based economics is not. Rather it is often a pattern fitted to a set of data, that all too often is statistically too small a sample size.
Austrian Economics is Praxeological. We do not derive our theories from statistics, but from logic and reason.
On January 29 2010 13:03 lixlix wrote: I will again emphasize the danger of economics theory as a science. People should stop thinking of statistics based economics theory as a science.
Science is testable, replicable, and produced through experiment. Statistics based economics is not. Rather it is often a pattern fitted to a set of data, that all too often is statistically too small a sample size.
Austrian Economics is Praxeological. We do not derive our theories from statistics, but from logic and reason.
On January 29 2010 13:03 lixlix wrote: I will again emphasize the danger of economics theory as a science. People should stop thinking of statistics based economics theory as a science.
Science is testable, replicable, and produced through experiment. Statistics based economics is not. Rather it is often a pattern fitted to a set of data, that all too often is statistically too small a sample size.
Austrian Economics is Praxeological. We do not derive our theories from statistics, but from logic and reason.
Rothbardian, I am an advocate of Austrian Economics when it comes to government intervention in monetary policy.
Yet you seem to take this a step further and somehow use Austrian school of Economics to support your views on social policies when in fact Austrian school Economics does not touch on this subject very much.
"In 2004, there were 34,785 registered lobbyists—65 lobbyists per congressperson. This is an increase of 113 percent since 2000, when there were 16,342 lobbyists."
These numbers are made public by the Senate! It us up to us to think critically of what the consequences may be.
There is a serious overrepresentation of corporate clients and a huge under-representation of the everyday people. Is there even time with 65 lobbyists per congressperson to really leave time for their voting constituents voices to be heard?
I'm not anti-business nor am I completely pro-government. I believe in a healthy balance of both. I want to see a *working* checks and balance system. I am just starting to realize/feel my helplessness as a citizen in this political system.
Here are a few startling facts derived from Two Income Trap. Please note that this book was published in 2003, way before this economic depression/recession:
- "Subprime lending has . . .ensnare[d] people who, in a regulated market, would have had access to lower-cost mortgages. Lenders' own data show that many of the families that end up in the subprime market are middle-class families that would typically qualify for a traditional mortgage."
- "A study by the Department of Housing and Urban Development revealed that one in nine middle-income families (and one in fourteen upper-income families) who refinanced a home mortgage ended up with a high-fee, high-interest subprime mortgage.
- "In 2002, Citibank's subprime lending subsidiary was prosecuted for decptive marketing practices, and the company paid $240 million to settle the case (at the time, the largest settlement of its kind). A former loan officer testified about how she marketed the mortgages: "If someone appeared uneducated, inarticulate, was a minority, or was particularly old or young, I would try to include all the [additional costs] CitiFinacial offered."
- "According to one study, African-American borrowers are 450 percent more likely than whites to end up with a subprime instead of a prime mortgage. In fact, residents in high-income, predominantly black neighborhoods are actually more likely to get a subprime mortgage than residents in low-income white neighborhoods - more than twice as likely."
- ". . .lenders have found that foreclosing can be more profitable than just simply collecting a mortgage payment every month, because the property can then be resold more than the outstanding loan amount." ***my aside, obviously this was before the recession and looked what has bite them in the a$$***
- "Credit card issuers make their profits form lending lots of money and charging hefty fees to families that are financially strapped. More than 75% of credit card profits come from people who make those low, minimum monthly payments. . .These are the families that are singled out by the lending industry, barraged with special offers, personalized advertisements, and home phone calls, all with one objective in mind: get them to borrow more money."
- "Sears reportedly earned more money from the interest and late fees the company charged to its credit cardholders than it earned from selling merchandise."
- "Payday lenders and subprime mortgages companies deliberately target minority neighborhoods, confident that they can get away with fleecing these families."
- "Hispanic homeowners are nearly three times more likely than white homeowners to file for bankruptcy, and black homeowners are more than six times more likely."
- "In just two decades, the number of single-filing women declaring bankruptcy has grown by more than 600 percent. Women with children are more likely to lose their homes and more likely to be late on their bills. And single women with children are three times more likely to go bankrupt than men without children.
I'm probably not the best to answer to all this because I'm not well versed in the housing bubble but... I encourage you to look not at the voluntary mishappenings from both the lenders and the homeowners, they've made bad investments and now they're paying for it (well, the homeowners at least). Instead, look at what could have brought about such crisis in the first place. What made the lenders so propitious to lend to anyone with a beat, and what made people buy houses they couldn't afford? The bubble, right? Every real-estate was getting more and more expensive, and to not buy a good house would be to miss out on the opportunity. But why did housing experience such an artificial boom and not some other random market like... the shoemaking industry?
Well I don't know, I don't give enough of a crap to check it out but I'm sure you'd be amazed to look for that LOL. Sorry, I wasn't much of a help, was I?
I'll try to study a bit a.k.a find some articles at mises.org and spout it all here.
On January 29 2010 13:17 lixlix wrote: Rothbardian, I am an advocate of Austrian Economics when it comes to government intervention in monetary policy.
Yet you seem to take this a step further and somehow use Austrian school of Economics to support your views on social policies when in fact Austrian school Economics does not touch on this subject very much.
Social policies can be seen just as well as economic policies, they're both attempting to motivate or demotivate people at doing something. Economics has to do with studying peoples choices so that could very well transit to non-financial activity. And austrian economics in of itself doesn't prescribe this or that policy, it just shows a lot of hidden costs of policies that other schools don't consider too much, maybe because they're too focused on aggregation and numberz. edit: Rothbardian could be doing something like that though, idk, didn't read any of the like myself...
On January 29 2010 12:47 lixlix wrote: I tend to think of the market as similar to a sports bet spread only without the game ever played.
That's a good analogy because people often don't look far enough into the future to see the "game played." However, people betting without taking the actual game into account, only looking at arbitrageurs and speculating, will pay hard when people who DO push them out. So yes, some people bet as if the game never plays, but they're taking a risk doing so.
"In 2004, there were 34,785 registered lobbyists—65 lobbyists per congressperson. This is an increase of 113 percent since 2000, when there were 16,342 lobbyists."
These numbers are made public by the Senate! It us up to us to think critically of what the consequences may be.
There is a serious overrepresentation of corporate clients and a huge under-representation of the everyday people. Is there even time with 65 lobbyists per congressperson to really leave time for their voting constituents voices to be heard?
I'm not anti-business nor am I completely pro-government. I believe in a healthy balance of both. I want to see a *working* checks and balance system. I am just starting to realize/feel my helplessness as a citizen in this political system.
Here are a few startling facts derived from Two Income Trap. Please note that this book was published in 2003, way before this economic depression/recession:
- "Subprime lending has . . .ensnare[d] people who, in a regulated market, would have had access to lower-cost mortgages. Lenders' own data show that many of the families that end up in the subprime market are middle-class families that would typically qualify for a traditional mortgage."
- "A study by the Department of Housing and Urban Development revealed that one in nine middle-income families (and one in fourteen upper-income families) who refinanced a home mortgage ended up with a high-fee, high-interest subprime mortgage.
- "In 2002, Citibank's subprime lending subsidiary was prosecuted for decptive marketing practices, and the company paid $240 million to settle the case (at the time, the largest settlement of its kind). A former loan officer testified about how she marketed the mortgages: "If someone appeared uneducated, inarticulate, was a minority, or was particularly old or young, I would try to include all the [additional costs] CitiFinacial offered."
- "According to one study, African-American borrowers are 450 percent more likely than whites to end up with a subprime instead of a prime mortgage. In fact, residents in high-income, predominantly black neighborhoods are actually more likely to get a subprime mortgage than residents in low-income white neighborhoods - more than twice as likely."
- ". . .lenders have found that foreclosing can be more profitable than just simply collecting a mortgage payment every month, because the property can then be resold more than the outstanding loan amount." ***my aside, obviously this was before the recession and looked what has bite them in the a$$***
- "Credit card issuers make their profits form lending lots of money and charging hefty fees to families that are financially strapped. More than 75% of credit card profits come from people who make those low, minimum monthly payments. . .These are the families that are singled out by the lending industry, barraged with special offers, personalized advertisements, and home phone calls, all with one objective in mind: get them to borrow more money."
- "Sears reportedly earned more money from the interest and late fees the company charged to its credit cardholders than it earned from selling merchandise."
- "Payday lenders and subprime mortgages companies deliberately target minority neighborhoods, confident that they can get away with fleecing these families."
- "Hispanic homeowners are nearly three times more likely than white homeowners to file for bankruptcy, and black homeowners are more than six times more likely."
- "In just two decades, the number of single-filing women declaring bankruptcy has grown by more than 600 percent. Women with children are more likely to lose their homes and more likely to be late on their bills. And single women with children are three times more likely to go bankrupt than men without children.
I'm probably not the best to answer to all this because I'm not well versed in the housing bubble but... I encourage you to look not at the voluntary mishappenings from both the lenders and the homeowners, they've made bad investments and now they're paying for it (well, the homeowners at least). Instead, look at what could have brought about such crisis in the first place. What made the lenders so propitious to lend to anyone with a beat, and what made people buy houses they couldn't afford? The bubble, right? Every real-estate was getting more and more expensive, and to not buy a good house would be to miss out on the opportunity. But why did housing experience such an artificial boom and not some other random market like... the shoemaking industry?
Well I don't know, I don't give enough of a crap to check it out but I'm sure you'd be amazed to look for that LOL. Sorry, I wasn't much of a help, was I?
I'll try to study a bit a.k.a find some articles at mises.org and spout it all here.
Yurebis, the problem is that the businesses made predatory loans and continue to do so because it is to their profit. It's an example of immoral business practices at work. In a completely deregulated market, what's to stop these businesses from fleecing customers?
Also, the statistics I listed are from BEFORE the housing bubble burst. The book is from 2003. It has nothing to do with the bubble at all. This is just the bread and butter of the banking industry owning the shit out of people who don't know enough about finance.
The problem I have with Austrian economics is it imagines a world where people are perfectly rational and perfectly educated in economics/finance when people are FAR FAR away from this ideal. It's like saying Communism would be perfect as long as everyone works to their max productivity all the time and has faith that everyone else will too.
On January 29 2010 13:17 lixlix wrote: Rothbardian, I am an advocate of Austrian Economics when it comes to government intervention in monetary policy.
Yet you seem to take this a step further and somehow use Austrian school of Economics to support your views on social policies when in fact Austrian school Economics does not touch on this subject very much.
Economists have always been and always will be Political Economists. Economics is a social doctrine as well. Is there not morality in action? Is it not immoral to steal? Is it not immoral for a coercive thieving monopoly?
Have you read: For a New Liberty by Rothbard by any chance? Even Mises, advocated for a minimalist State in only police, military, and law/court. Is not the advocacy of the extent of State action an inherent social theme?
"In 2004, there were 34,785 registered lobbyists—65 lobbyists per congressperson. This is an increase of 113 percent since 2000, when there were 16,342 lobbyists."
These numbers are made public by the Senate! It us up to us to think critically of what the consequences may be.
There is a serious overrepresentation of corporate clients and a huge under-representation of the everyday people. Is there even time with 65 lobbyists per congressperson to really leave time for their voting constituents voices to be heard?
I'm not anti-business nor am I completely pro-government. I believe in a healthy balance of both. I want to see a *working* checks and balance system. I am just starting to realize/feel my helplessness as a citizen in this political system.
Here are a few startling facts derived from Two Income Trap. Please note that this book was published in 2003, way before this economic depression/recession:
- "Subprime lending has . . .ensnare[d] people who, in a regulated market, would have had access to lower-cost mortgages. Lenders' own data show that many of the families that end up in the subprime market are middle-class families that would typically qualify for a traditional mortgage."
- "A study by the Department of Housing and Urban Development revealed that one in nine middle-income families (and one in fourteen upper-income families) who refinanced a home mortgage ended up with a high-fee, high-interest subprime mortgage.
- "In 2002, Citibank's subprime lending subsidiary was prosecuted for decptive marketing practices, and the company paid $240 million to settle the case (at the time, the largest settlement of its kind). A former loan officer testified about how she marketed the mortgages: "If someone appeared uneducated, inarticulate, was a minority, or was particularly old or young, I would try to include all the [additional costs] CitiFinacial offered."
- "According to one study, African-American borrowers are 450 percent more likely than whites to end up with a subprime instead of a prime mortgage. In fact, residents in high-income, predominantly black neighborhoods are actually more likely to get a subprime mortgage than residents in low-income white neighborhoods - more than twice as likely."
- ". . .lenders have found that foreclosing can be more profitable than just simply collecting a mortgage payment every month, because the property can then be resold more than the outstanding loan amount." ***my aside, obviously this was before the recession and looked what has bite them in the a$$***
- "Credit card issuers make their profits form lending lots of money and charging hefty fees to families that are financially strapped. More than 75% of credit card profits come from people who make those low, minimum monthly payments. . .These are the families that are singled out by the lending industry, barraged with special offers, personalized advertisements, and home phone calls, all with one objective in mind: get them to borrow more money."
- "Sears reportedly earned more money from the interest and late fees the company charged to its credit cardholders than it earned from selling merchandise."
- "Payday lenders and subprime mortgages companies deliberately target minority neighborhoods, confident that they can get away with fleecing these families."
- "Hispanic homeowners are nearly three times more likely than white homeowners to file for bankruptcy, and black homeowners are more than six times more likely."
- "In just two decades, the number of single-filing women declaring bankruptcy has grown by more than 600 percent. Women with children are more likely to lose their homes and more likely to be late on their bills. And single women with children are three times more likely to go bankrupt than men without children.
I'm probably not the best to answer to all this because I'm not well versed in the housing bubble but... I encourage you to look not at the voluntary mishappenings from both the lenders and the homeowners, they've made bad investments and now they're paying for it (well, the homeowners at least). Instead, look at what could have brought about such crisis in the first place. What made the lenders so propitious to lend to anyone with a beat, and what made people buy houses they couldn't afford? The bubble, right? Every real-estate was getting more and more expensive, and to not buy a good house would be to miss out on the opportunity. But why did housing experience such an artificial boom and not some other random market like... the shoemaking industry?
Well I don't know, I don't give enough of a crap to check it out but I'm sure you'd be amazed to look for that LOL. Sorry, I wasn't much of a help, was I?
I'll try to study a bit a.k.a find some articles at mises.org and spout it all here.
Yurebis, the problem is that the businesses made predatory loans and continue to do so because it is to their profit. It's an example of immoral business practices at work. In a completely deregulated market, what's to stop these businesses from fleecing customers?
Also, the statistics I listed are from BEFORE the housing bubble burst. The book is from 2003. It has nothing to do with the bubble at all. This is just the bread and butter of the banking industry owning the shit out of people who don't know enough about finance.
The problem I have with Austrian economics is it imagines a world where people are perfectly rational and perfectly educated in economics/finance when people are FAR FAR away from this ideal. It's like saying Communism would be perfect as long as everyone works to their max productivity all the time and has faith that everyone else will too.
Take a step back. Who was the guarantor of these loans? When you take risk away from the market calculation of course people will take undue risks they would never do without the Moral Hazard foisted upon them. If the Government never guaranteed these loans in the first place they would have never happened. Secondly, if we didn't have the Federal Reserve which is a State chartered creation, as are all Central Banks we wouldn't of had these types of loans either. Even after that you can attribute massive distortions also on FDIC. No one looks at Bank liquidity, or strength anymore. No one looks to Consumer Reports on the best banking institutions. Why? FDIC.
You should take a small step back and look at the historical perspective. We had a much more freer Economy in the 19th Century, yet, we had the greatest increase in the standard of living during that Century during a time where there was no Central Banks (for the most part, as the First and Second Central Banks didn't last that long). There was no FDIC. There were little to no regulation. There were no internal improvement subsidies. There was no Welfare. There was no standing army. The complete and total spending by the Government totaled anywhere between 1 to 2% of GDP, where as today it is 45%+. How come we had this enormous growth with a largely unregulated economy? We had wholly private infrastructure in energy, roads, waterways, sewage, etc. Prices lowered all throughout the 19th Century. We had commodity-currency, etc.
How do you explain this? You still have not addressed this at all. It is as if you are ignoring the entirity of the 19th Century and acting like it never happened.
Rothbard is an anarchist. True, he is also an Austrian School Economist but I feel that you are misrepresenting Austrian Economic theory when you stick mostly to the more polarizing figures.
On January 29 2010 13:41 lixlix wrote: Rothbard is an anarchist. True, he is also an Austrian School Economist but I feel that you are misrepresenting Austrian Economic theory when you stick mostly to Rothbard.
Are you aware the modern day Austrian School is 99% anarchist? I am also a Voluntaryist (Anarcho-Capitalist).
Seriously within the School it is no longer debatable about Statism vs. Anarchism. It is pretty much the dominant Economic and Social Theory espoused. Sure, there is Peter who is a Minarchist, but generally, everyone is an Anarcho-Capitalist.
Hoppe Block Murphy Tucker Hulsmann De Soto Di'Lorenzo Woods Rockwell
etc.
Even some Chicagoites are turning Anarcho-Capitalists like Friedman. The next great revolution will be an all voluntary society.
"In 2004, there were 34,785 registered lobbyists—65 lobbyists per congressperson. This is an increase of 113 percent since 2000, when there were 16,342 lobbyists."
These numbers are made public by the Senate! It us up to us to think critically of what the consequences may be.
There is a serious overrepresentation of corporate clients and a huge under-representation of the everyday people. Is there even time with 65 lobbyists per congressperson to really leave time for their voting constituents voices to be heard?
I'm not anti-business nor am I completely pro-government. I believe in a healthy balance of both. I want to see a *working* checks and balance system. I am just starting to realize/feel my helplessness as a citizen in this political system.
Here are a few startling facts derived from Two Income Trap. Please note that this book was published in 2003, way before this economic depression/recession:
- "Subprime lending has . . .ensnare[d] people who, in a regulated market, would have had access to lower-cost mortgages. Lenders' own data show that many of the families that end up in the subprime market are middle-class families that would typically qualify for a traditional mortgage."
- "A study by the Department of Housing and Urban Development revealed that one in nine middle-income families (and one in fourteen upper-income families) who refinanced a home mortgage ended up with a high-fee, high-interest subprime mortgage.
- "In 2002, Citibank's subprime lending subsidiary was prosecuted for decptive marketing practices, and the company paid $240 million to settle the case (at the time, the largest settlement of its kind). A former loan officer testified about how she marketed the mortgages: "If someone appeared uneducated, inarticulate, was a minority, or was particularly old or young, I would try to include all the [additional costs] CitiFinacial offered."
- "According to one study, African-American borrowers are 450 percent more likely than whites to end up with a subprime instead of a prime mortgage. In fact, residents in high-income, predominantly black neighborhoods are actually more likely to get a subprime mortgage than residents in low-income white neighborhoods - more than twice as likely."
- ". . .lenders have found that foreclosing can be more profitable than just simply collecting a mortgage payment every month, because the property can then be resold more than the outstanding loan amount." ***my aside, obviously this was before the recession and looked what has bite them in the a$$***
- "Credit card issuers make their profits form lending lots of money and charging hefty fees to families that are financially strapped. More than 75% of credit card profits come from people who make those low, minimum monthly payments. . .These are the families that are singled out by the lending industry, barraged with special offers, personalized advertisements, and home phone calls, all with one objective in mind: get them to borrow more money."
- "Sears reportedly earned more money from the interest and late fees the company charged to its credit cardholders than it earned from selling merchandise."
- "Payday lenders and subprime mortgages companies deliberately target minority neighborhoods, confident that they can get away with fleecing these families."
- "Hispanic homeowners are nearly three times more likely than white homeowners to file for bankruptcy, and black homeowners are more than six times more likely."
- "In just two decades, the number of single-filing women declaring bankruptcy has grown by more than 600 percent. Women with children are more likely to lose their homes and more likely to be late on their bills. And single women with children are three times more likely to go bankrupt than men without children.
I'm probably not the best to answer to all this because I'm not well versed in the housing bubble but... I encourage you to look not at the voluntary mishappenings from both the lenders and the homeowners, they've made bad investments and now they're paying for it (well, the homeowners at least). Instead, look at what could have brought about such crisis in the first place. What made the lenders so propitious to lend to anyone with a beat, and what made people buy houses they couldn't afford? The bubble, right? Every real-estate was getting more and more expensive, and to not buy a good house would be to miss out on the opportunity. But why did housing experience such an artificial boom and not some other random market like... the shoemaking industry?
Well I don't know, I don't give enough of a crap to check it out but I'm sure you'd be amazed to look for that LOL. Sorry, I wasn't much of a help, was I?
I'll try to study a bit a.k.a find some articles at mises.org and spout it all here.
Yurebis, the problem is that the businesses made predatory loans and continue to do so because it is to their profit. It's an example of immoral business practices at work. In a completely deregulated market, what's to stop these businesses from fleecing customers?
Also, the statistics I listed are from BEFORE the housing bubble burst. The book is from 2003. It has nothing to do with the bubble at all. This is just the bread and butter of the banking industry owning the shit out of people who don't know enough about finance.
The problem I have with Austrian economics is it imagines a world where people are perfectly rational and perfectly educated in economics/finance when people are FAR FAR away from this ideal. It's like saying Communism would be perfect as long as everyone works to their max productivity all the time and has faith that everyone else will too.
Oh I see. Ok. What's your contention then? Because till the buble burst, I think everyone was content with their ever-increasing house prices. So much so, that people were willing to bet on variable or high interest rates, falsify their income statements, whatever it may be.
The ones who can stop greedy entrepreneurs (aka competition) are other greedy entrepreneurs who will engage in a sort of reverse-auctioning style of battle to get the most consumers. They will raise as much as they can, only so much that someone else can't come in and undercut him!
Austrian economics does imagine something like, "men act to their own benefit" but that's about it. What would a statist propose as a principle instead, "men are dumb and need a slavemaster?" I think the former would make more sense! Who is to help you make a good decision if not yourself?
Not having knowledge, or not seeking it, also makes part of human action also. I think the argument is that, when inaction brings more benefit than acting, then not acting makes sense. Someone not looking to become a masters in finance has judged that he will not get enough benefits from such knowledge given the perceived costs.
Rothbard, I highly doubt poor Latino people took out these loans because they thought there was a government guarantee. Rather, I think they stumbled around the bank in a semi-literate haze and just wanted to know how much they had to pay each month to have a house. And after a whole lot of gobbledygook they walked out thinking they were getting a sweet deal at $1,100 a month on their house mortgage.
Then they were scared and confused when that monthly suddenly jumped to $1,600 a month for no reasons they could fathom.
You should take a small step back and realize we're talking about humans here. Not robots imagined in an academic's dreams.
You know why there was a great increase in the standard of living during the 19th century? Because the USA was busy exploiting an entire freaking continent that they just recently conquered. I'm pretty sure if you gave any decently functional society an entire unspoiled continent of natural resources, they would experience some pretty solid growth too. It's a pretty easy explanation and one I hope you can wrap your head around, as I find it somewhat troubling you would not be able to come to this conclusion yourself.
What exactly was a private infrastructure in roads? The Oregon Trail? Sorry but just rofl man. You're talking nonsense.
On January 29 2010 13:49 StorkHwaiting wrote: Rothbard, I highly doubt poor Latino people took out these loans because they thought there was a government guarantee. Rather, I think they stumbled around the bank in a semi-literate haze and just wanted to know how much they had to pay each month to have a house. And after a whole lot of gobbledygook they walked out thinking they were getting a sweet deal at $1,100 a month on their house mortgage.
Then they were scared and confused when that monthly suddenly jumped to $1,600 a month for no reasons they could fathom.
You should take a small step back and realize we're talking about humans here. Not robots imagined in an academic's dreams.
You know why there was a great increase in the standard of living during the 19th century? Because the USA was busy exploiting an entire freaking continent that they just recently conquered. I'm pretty sure if you gave any decently functional society an entire unspoiled continent of natural resources, they would experience some pretty solid growth too. It's a pretty easy explanation and one I hope you can wrap your head around, as I find it somewhat troubling you would not be able to come to this conclusion yourself.
What exactly was a private infrastructure in roads? The Oregon Trail? Sorry but just rofl man. You're talking nonsense.
You still don't understand. The banks would have never authorized or underwritten these loans knowing they would have never returned on their investment (the loan) because in the Free-Market these would be a death sentence of any institution. Bankruptcy and liquidation would have followed. Of course, they didn't care about the ability of the loanee to pay the loan, because they were guaranteed payment on the loan because the Government guaranteed these loans, and because there is always a "lender of last resort" or, the State / Central Bank. The Government has been bailing out institutions since forever. Remember S&L? What about the 1980s bailouts? What about before then? The problem isn't from the Free-Market the failure is of Statism. Time and time again.
You are not looking at the cause. You are looking at the symptom and trying to diagnose a cure based on the symptom. It's like trying to cure a cold by giving someone cough medicine.
What was private infrastructure? Here is a paper by Di'Lorenzo.
The [private road-building] movement built new roads at rates previously unheard of in America. Over $11 million was invested in turnpikes in New York, some $6.5 million in New England, and over $4.5 million in Pennsylvania. . . . Between 1794 and 1840, 238 private New England turnpike companies built and operated about 3,750 miles of road. New York led all other states in turnpike mileage with over 4,000 as of 1821. Pennsylvania was second, reaching a peak of about 2,400 miles in 1832. New Jersey companies operated 50 miles by 1821 . . . [B]etween 1810 and 1845 over 400 [private] turnpikes were chartered and built . . .
This article is really illuminating. You should give it a read. It isn't long at all.
PS: You are aware that currently roughly about 50% of the total land mass of America is public and most unused? Why not allow people to homestead this land?
I was about to reply a very watered down version of rothbardian's post so instead I'll just vouch for that.
The state has incentivized so many booms and crashes that it's not even funny. If you wanna blame anyone for all the malinvestments being made in any market I think that's where you should look first to find the possible truth.
On January 29 2010 13:59 lixlix wrote: Using the housing bubble as evidence of either the evils of free market or the evils of government is just silly.
The bubble is created by one thing, greed, both on the part of the lender and on the part of the borrower.
Again no. The bubble is caused by artificially low-interest rates.
On January 29 2010 13:49 StorkHwaiting wrote: Rothbard, I highly doubt poor Latino people took out these loans because they thought there was a government guarantee. Rather, I think they stumbled around the bank in a semi-literate haze and just wanted to know how much they had to pay each month to have a house. And after a whole lot of gobbledygook they walked out thinking they were getting a sweet deal at $1,100 a month on their house mortgage.
Then they were scared and confused when that monthly suddenly jumped to $1,600 a month for no reasons they could fathom.
You should take a small step back and realize we're talking about humans here. Not robots imagined in an academic's dreams.
You know why there was a great increase in the standard of living during the 19th century? Because the USA was busy exploiting an entire freaking continent that they just recently conquered. I'm pretty sure if you gave any decently functional society an entire unspoiled continent of natural resources, they would experience some pretty solid growth too. It's a pretty easy explanation and one I hope you can wrap your head around, as I find it somewhat troubling you would not be able to come to this conclusion yourself.
What exactly was a private infrastructure in roads? The Oregon Trail? Sorry but just rofl man. You're talking nonsense.
You still don't understand. The banks would have never authorized or underwritten these loans knowing they would have never returned on their investment (the loan) because in the Free-Market these would be a death sentence of any institution. Bankruptcy and liquidation would have followed. Of course, they didn't care about the ability of the loanee to pay the loan, because they were guaranteed payment on the loan because the Government guaranteed these loans, and because there is always a "lender of last resort" or, the State / Central Bank. The Government has been bailing out institutions since forever. Remember S&L? What about the 1980s bailouts? What about before then? The problem isn't from the Free-Market the failure is of Statism. Time and time again.
You are not looking at the cause. You are looking at the symptom and trying to diagnose a cure based on the symptom. It's like trying to cure a cold by giving someone cough medicine.
What was private infrastructure? Here is a paper by Di'Lorenzo.
The [private road-building] movement built new roads at rates previously unheard of in America. Over $11 million was invested in turnpikes in New York, some $6.5 million in New England, and over $4.5 million in Pennsylvania. . . . Between 1794 and 1840, 238 private New England turnpike companies built and operated about 3,750 miles of road. New York led all other states in turnpike mileage with over 4,000 as of 1821. Pennsylvania was second, reaching a peak of about 2,400 miles in 1832. New Jersey companies operated 50 miles by 1821 . . . [B]etween 1810 and 1845 over 400 [private] turnpikes were chartered and built . . .
This article is really illuminating. You should give it a read. It isn't long at all.
PS: You are aware that currently roughly about 50% of the total land mass of America is public and most unused? Why not allow people to homestead this land?
OK, those are good points Rothbard. Thanks for keeping at it. I'd agree you're right in this situation.
Btw, just for the record, I am against central banking. I'll read your article very soon. It's not coz I'm lazy, I'm just looking through one of my stories right now that's about to go to print for any last minute typos . Will be back shortly.
On January 29 2010 13:49 StorkHwaiting wrote: Rothbard, I highly doubt poor Latino people took out these loans because they thought there was a government guarantee. Rather, I think they stumbled around the bank in a semi-literate haze and just wanted to know how much they had to pay each month to have a house. And after a whole lot of gobbledygook they walked out thinking they were getting a sweet deal at $1,100 a month on their house mortgage.
Then they were scared and confused when that monthly suddenly jumped to $1,600 a month for no reasons they could fathom.
You should take a small step back and realize we're talking about humans here. Not robots imagined in an academic's dreams.
You know why there was a great increase in the standard of living during the 19th century? Because the USA was busy exploiting an entire freaking continent that they just recently conquered. I'm pretty sure if you gave any decently functional society an entire unspoiled continent of natural resources, they would experience some pretty solid growth too. It's a pretty easy explanation and one I hope you can wrap your head around, as I find it somewhat troubling you would not be able to come to this conclusion yourself.
What exactly was a private infrastructure in roads? The Oregon Trail? Sorry but just rofl man. You're talking nonsense.
You still don't understand. The banks would have never authorized or underwritten these loans knowing they would have never returned on their investment (the loan) because in the Free-Market these would be a death sentence of any institution. Bankruptcy and liquidation would have followed. Of course, they didn't care about the ability of the loanee to pay the loan, because they were guaranteed payment on the loan because the Government guaranteed these loans, and because there is always a "lender of last resort" or, the State / Central Bank. The Government has been bailing out institutions since forever. Remember S&L? What about the 1980s bailouts? What about before then? The problem isn't from the Free-Market the failure is of Statism. Time and time again.
You are not looking at the cause. You are looking at the symptom and trying to diagnose a cure based on the symptom. It's like trying to cure a cold by giving someone cough medicine.
What was private infrastructure? Here is a paper by Di'Lorenzo.
The [private road-building] movement built new roads at rates previously unheard of in America. Over $11 million was invested in turnpikes in New York, some $6.5 million in New England, and over $4.5 million in Pennsylvania. . . . Between 1794 and 1840, 238 private New England turnpike companies built and operated about 3,750 miles of road. New York led all other states in turnpike mileage with over 4,000 as of 1821. Pennsylvania was second, reaching a peak of about 2,400 miles in 1832. New Jersey companies operated 50 miles by 1821 . . . [B]etween 1810 and 1845 over 400 [private] turnpikes were chartered and built . . .
This article is really illuminating. You should give it a read. It isn't long at all.
PS: You are aware that currently roughly about 50% of the total land mass of America is public and most unused? Why not allow people to homestead this land?
Rothbardian, could you be a little more specific in responding to StorkHwating's criticism that US growth was a result of the abundance of natural resources in North America not the free market. I assume that his argument is that a mixed economy would have just as much growth. Thanks.
On January 29 2010 13:49 StorkHwaiting wrote: Rothbard, I highly doubt poor Latino people took out these loans because they thought there was a government guarantee. Rather, I think they stumbled around the bank in a semi-literate haze and just wanted to know how much they had to pay each month to have a house. And after a whole lot of gobbledygook they walked out thinking they were getting a sweet deal at $1,100 a month on their house mortgage.
Then they were scared and confused when that monthly suddenly jumped to $1,600 a month for no reasons they could fathom.
You should take a small step back and realize we're talking about humans here. Not robots imagined in an academic's dreams.
You know why there was a great increase in the standard of living during the 19th century? Because the USA was busy exploiting an entire freaking continent that they just recently conquered. I'm pretty sure if you gave any decently functional society an entire unspoiled continent of natural resources, they would experience some pretty solid growth too. It's a pretty easy explanation and one I hope you can wrap your head around, as I find it somewhat troubling you would not be able to come to this conclusion yourself.
What exactly was a private infrastructure in roads? The Oregon Trail? Sorry but just rofl man. You're talking nonsense.
You still don't understand. The banks would have never authorized or underwritten these loans knowing they would have never returned on their investment (the loan) because in the Free-Market these would be a death sentence of any institution. Bankruptcy and liquidation would have followed. Of course, they didn't care about the ability of the loanee to pay the loan, because they were guaranteed payment on the loan because the Government guaranteed these loans, and because there is always a "lender of last resort" or, the State / Central Bank. The Government has been bailing out institutions since forever. Remember S&L? What about the 1980s bailouts? What about before then? The problem isn't from the Free-Market the failure is of Statism. Time and time again.
You are not looking at the cause. You are looking at the symptom and trying to diagnose a cure based on the symptom. It's like trying to cure a cold by giving someone cough medicine.
What was private infrastructure? Here is a paper by Di'Lorenzo.
The [private road-building] movement built new roads at rates previously unheard of in America. Over $11 million was invested in turnpikes in New York, some $6.5 million in New England, and over $4.5 million in Pennsylvania. . . . Between 1794 and 1840, 238 private New England turnpike companies built and operated about 3,750 miles of road. New York led all other states in turnpike mileage with over 4,000 as of 1821. Pennsylvania was second, reaching a peak of about 2,400 miles in 1832. New Jersey companies operated 50 miles by 1821 . . . [B]etween 1810 and 1845 over 400 [private] turnpikes were chartered and built . . .
This article is really illuminating. You should give it a read. It isn't long at all.
PS: You are aware that currently roughly about 50% of the total land mass of America is public and most unused? Why not allow people to homestead this land?
OK, those are good points Rothbard. Thanks for keeping at it. I'd agree you're right in this situation.
Btw, just for the record, I am against central banking. I'll read your article very soon. It's not coz I'm lazy, I'm just looking through one of my stories right now that's about to go to print for any last minute typos . Will be back shortly.
Understood :p I'm glad we can have a civil debate. It is so refreshing to be able to really have a back and forth exchange and debate. Hell, even two years ago I didn't know much of this stuff either. A little self-education, and then some courses under tutelage of Austrians really helped out
It really helps to both read Economic Theory and to read History. They really do go hand in hand.
On January 29 2010 13:49 StorkHwaiting wrote: Rothbard, I highly doubt poor Latino people took out these loans because they thought there was a government guarantee. Rather, I think they stumbled around the bank in a semi-literate haze and just wanted to know how much they had to pay each month to have a house. And after a whole lot of gobbledygook they walked out thinking they were getting a sweet deal at $1,100 a month on their house mortgage.
Then they were scared and confused when that monthly suddenly jumped to $1,600 a month for no reasons they could fathom.
You should take a small step back and realize we're talking about humans here. Not robots imagined in an academic's dreams.
You know why there was a great increase in the standard of living during the 19th century? Because the USA was busy exploiting an entire freaking continent that they just recently conquered. I'm pretty sure if you gave any decently functional society an entire unspoiled continent of natural resources, they would experience some pretty solid growth too. It's a pretty easy explanation and one I hope you can wrap your head around, as I find it somewhat troubling you would not be able to come to this conclusion yourself.
What exactly was a private infrastructure in roads? The Oregon Trail? Sorry but just rofl man. You're talking nonsense.
You still don't understand. The banks would have never authorized or underwritten these loans knowing they would have never returned on their investment (the loan) because in the Free-Market these would be a death sentence of any institution. Bankruptcy and liquidation would have followed. Of course, they didn't care about the ability of the loanee to pay the loan, because they were guaranteed payment on the loan because the Government guaranteed these loans, and because there is always a "lender of last resort" or, the State / Central Bank. The Government has been bailing out institutions since forever. Remember S&L? What about the 1980s bailouts? What about before then? The problem isn't from the Free-Market the failure is of Statism. Time and time again.
You are not looking at the cause. You are looking at the symptom and trying to diagnose a cure based on the symptom. It's like trying to cure a cold by giving someone cough medicine.
What was private infrastructure? Here is a paper by Di'Lorenzo.
The [private road-building] movement built new roads at rates previously unheard of in America. Over $11 million was invested in turnpikes in New York, some $6.5 million in New England, and over $4.5 million in Pennsylvania. . . . Between 1794 and 1840, 238 private New England turnpike companies built and operated about 3,750 miles of road. New York led all other states in turnpike mileage with over 4,000 as of 1821. Pennsylvania was second, reaching a peak of about 2,400 miles in 1832. New Jersey companies operated 50 miles by 1821 . . . [B]etween 1810 and 1845 over 400 [private] turnpikes were chartered and built . . .
This article is really illuminating. You should give it a read. It isn't long at all.
PS: You are aware that currently roughly about 50% of the total land mass of America is public and most unused? Why not allow people to homestead this land?
Rothbardian, could you be a little more specific in responding to StorkHwating's criticism that US growth was a result of the abundance of natural resources in North America not the free market. I assume that his argument is that a mixed economy would have just as much growth. Thanks.
Sure thing. I didn't really want to tackle it in a post, because it is a long expose and not something that is easily truncated in short segments.
Remember that growth hinges on capital and savings. In the 19th Century the US did not have a Capital Gains Tax. Did not have an inheritence tax. Did not have an inflation tax. Did not have an Income tax. Did not have property taxes. Did not have really any taxes save for the occasional excise and small dutys and imposts. While we still did have a commodity-currency, and while we did make some horrible mistakes in banking such as outlawing branch banking which resulted in massive bank failures in I believe the 1840s, we were more or less Laissez-Faire in the traditional sense (Not the radical anarchistic Laissez-Faire approach). Just imagine that you have a pendulum. On the right side represents both Economic and Civil liberty, and on the left represents prosperity. In the 19th Century America was more or less 85-90% Laissez-Faire. Conversely, the pendulum will swing further into prosperity the greater amount of economic and civil liberty one has. Take it to its logical conclusion of Market-Anarchism, will result in the greatest amount of prosperity. You can easily demonstrate the validity by looking at historical examples. For instance, Cuba, USSR, East Germany, etc. These Nation-States had little to no economic liberty and were (or still are in Cuba's case) accordingly very poor. It is likewise easy to see this correlation given the fact that Hong Kong is prosperous and North Korea is not.
Isn't North Korea larger than Hong Kong? Doesn't North Korea have more resources than Hong Kong? How then, is Hong Kong more prosperous?
Returning to America and really, the European Nation-States also in the 19th Century. Remember, the 19th Century for the most part was prior to fervant Nationalism which ultimately results in protectionist and mercantilistic policy. This meant that throughout the 19th Century the world was largely a Free-Trade mecca. From repeal of the Corn Tariffs in Britain to the Free-Trade summits of the Laissez-Faire liberals in France, to the Jacksonian and Cleveland periods in America goods and services flowed freely from these Nation-States. There were little impediment. Capital could easily flow into the most productive areas. This, we call Division of Labor. It is only natural that certain products will be made cheaper in certain areas. There is no reason to artificially pump up prices which are ultimately paid for through subsidy and thus, inefficiency. This destroys wealth, capital, and standards of living as evidenced by the Great Depression. What happens is that specialities arise. It is advantageous for the people of America to specialize in products that net a greater gain by sole production than if both America and Britain produced the good. This means in the aggregate more of the two products are made if each specializes than if each were to try to be figuratively "Jack of all trades, master of none". This is what happened in the 19th Century, which as we can see results in greater standard of living.
I will also return to what Joseph Schumpeter has said:
An ‘automatic’ gold currency is part and parcel of a laissez-faire and free-trade economy. It links every nation’s money rates and price levels with the money-rates and price levels of all the other nations that are ‘on gold.’ It is extremely sensitive to government expenditure and even to attitudes or policies that do not involve expenditure directly, for example, to foreign policy, to certain policies of taxation, and, in general, to precisely all those policies that violate the principles of [classical] liberalism. This is the reason why gold is so unpopular now and also why it was so popular in a bourgeois era. It imposes restrictions upon governments or bureaucracies that are much more powerful than is parliamentary criticism. It is both the badge and the guarantee of bourgeois freedom—of freedom not simply of the bourgeois interest, but of freedom in the bourgeois sense. From this standpoint a man may quite rationally fight for it, even if fully convinced of the validity of all that has ever been urged against it on economic grounds. From the standpoint of etatisme and planning, a man may not less rationally condemn it, even if fully convinced of the validity of all that has ever been urged for it on economic grounds.
At this time every country was under a commodity currency. It stifled the ability of the State to enact wide ranging social measures which are destructive of capital. With little to no taxation in Britain, France, and America an explosion of capital happened. This ultimately flowed to the entreprenuers such as Tesla and Westinghouse who had no adverse Moral Hazards levied upon by the State. I think a good cursory knowledge of the foundation of capital and its effects will adequately explain why such a growth occured. I like this simple yet effective piece by Irwin Schiff:
^ This is really good.
As we can also see by the article I previously sourced, what we now think of as public goods, or services, were pretty much wholly privatized in the 19th Century. This meant that roads, waterways, trash, etc. were under market mechanisms and accordingly were price calculated. Today we can see without the calculation of price mechanisms that we run into massive shortages, especially in regards to water. Why do we have all these regulations preventing entreprenuers from building mass de-salinization plants? Why do we have over use of water resources in the first place? Because it's so cheap and the State refuses to privatize to allow for Say's Law to take effect. We would never have a shortage of water if for instance, the price of water was in proportion to its availability. We wouldn't need to fine people for using water. We wouldn't need Police State measures making sure we were abiding by State dictates.
It really isn't too complicated though. We just have to once again be confident in liberty and freedom.
I also skipped over regulatory policy, which includes the Sherman and Clayton debacles. That is for another time, but was also another contributor. A "monopoly" in the Free-Market can only happen for a fleeting and temporary period of time, and such a source or "single supplier" will only happen given that the supplier both prices it's products cheaper than all competitors and the quality of product is much higher. I don't think anyone would argue against these beneficial characteristics, but alas they did, and they won in the late 1890s. From Standard Oil to ALCOA it was a bane to consumers. I could go on for pages about this travesty, but needless to say a quick search on mises will pull up the relevant articles.
On January 29 2010 14:20 Yurebis wrote: thats too cheesy. how about "lets stop saying lets", u collectivist? lolol
Bah. I hate Rand. Collectivism is the hierachal (sp? kinda getting tired at the moment lol) structure that a group has rights over an individual. Stereotyping for instance, is not collectivism, nor is putting people into groups or labels. Collectivization is collectivism, for example.
Of course we can disagree, but that is generally my view on that subject :p
On January 29 2010 14:20 Yurebis wrote: thats too cheesy. how about "lets stop saying lets", u collectivist? lolol
Bah. I hate Rand. Collectivism is the hierachal (sp? kinda getting tired at the moment lol) structure that a group has rights over an individual. Stereotyping for instance, is not collectivism, nor is putting people into groups or labels. Collectivization is collectivism, for example.
Of course we can disagree, but that is generally my view on that subject :p
This I simply don't understand. I am an Objectivist and I can understand that you dislike Rand's opposition to anarchism -- but I can't understand why that leads to "Hat[ing]" her. Perhaps you dislike her ethical theory? Or her "absolutism" ?
In regard to the post on economic growth in early america, thanks. It is really useful for me.
BTW, you may have read this (but probably after The Sociology of the Ayn Rand Cult" paper) but it is an interesting examination of Rothbard's early views on Rand:
On January 29 2010 14:20 Yurebis wrote: thats too cheesy. how about "lets stop saying lets", u collectivist? lolol
Bah. I hate Rand. Collectivism is the hierachal (sp? kinda getting tired at the moment lol) structure that a group has rights over an individual. Stereotyping for instance, is not collectivism, nor is putting people into groups or labels. Collectivization is collectivism, for example.
Of course we can disagree, but that is generally my view on that subject :p
This I simply don't understand. I am an Objectivist and I can understand that you dislike Rand's opposition to anarchism -- but I can't understand why that leads to "Hat[ing]" her. Perhaps you dislike her ethical theory? Or her "absolutism" ?
In regard to the post on economic growth in early america, thanks. It is really useful for me.
The reason I dislike Rand so much is because she said of libertarianism:
"Because Libertarians are a monstrous, disgusting bunch of people"
Not only that, she was fervantly Pro-IP. I am anti-IP in the Stephen Kinsella and Rothbard tradition. She also hated Rothbard, and she was a cultist. She proclaimed individuality, yet did not allow anyone in the Cult of Rand to be an individual. This is clearly documented especially so when her son left. Here is what Rothbard had to say:
Introduction: The Paralysis of Criticism: Society Without Opposition
Part I: One-Dimensional Society
1. The New Forms of Control 2. The Closing of the Political Universe 3. The Conquest of the Unhappy Consciousness: Repressive Desublimation 4. The Closing of the Universe of Discourse
Part II: One-Dimensional Thought
5. Negative Thinking: The Defeated Logic of Protest 6. From Negative to Positive Thinking: Technological Rationality and the Logic of Domination 7. The Triumph of Positive Thinking: One-Dimensional Philosophy
Part III: The Chance of the Alternatives
8. The Historical Commitment of Philosophy 9. The Catastrophe of Liberation 10. Conclusion
On January 29 2010 14:53 lOvOlUNiMEDiA wrote: BTW, you may have read this (but probably after The Sociology of the Ayn Rand Cult" paper) but it is an interesting examination of Rothbard's early views on Rand:
On January 29 2010 14:53 lOvOlUNiMEDiA wrote: BTW, you may have read this (but probably after The Sociology of the Ayn Rand Cult" paper) but it is an interesting examination of Rothbard's early views on Rand:
Thank you. I will read this. It still doesn't change the fact she called me monstrous and disgusting.
Right. What she thought was disgusting was, basically, the way (she perceived) libertarians trying to ground their moral views. The Objectivist view is that deontological arguments all fail because, ultimately, they are arbitrary. I won't bother defending the views here -- I simply don't want to spend the time it would take to do it. If you are really curious you can read a professional Objectivist's criticism of Kantian versions of morality in this book: VIABLE VALUES
Introduction: The Paralysis of Criticism: Society Without Opposition
Part I: One-Dimensional Society
1. The New Forms of Control 2. The Closing of the Political Universe 3. The Conquest of the Unhappy Consciousness: Repressive Desublimation 4. The Closing of the Universe of Discourse
Part II: One-Dimensional Thought
5. Negative Thinking: The Defeated Logic of Protest 6. From Negative to Positive Thinking: Technological Rationality and the Logic of Domination 7. The Triumph of Positive Thinking: One-Dimensional Philosophy
Part III: The Chance of the Alternatives
8. The Historical Commitment of Philosophy 9. The Catastrophe of Liberation 10. Conclusion
Marcuse wasn’t a known figure until he took up the flag and figurehead of the student-revolt in the 60s. The student-revolt was, by admission of the rebels and by commentators on both sides of the political spectrum, the eruption of the “new-left” onto the American cultural and political stage. What is the “new-left” movement and why would it select Marcuse as its leading spokesman?
While the student-rebels rallied behind traditional ‘leftist’ causes, an article from the Saturday Evening Post (May, 1965) captures the essential quality of the new-left when it quotes a leader of the student movement as follows, “We began by rejecting the old sectarian left and its ancient quarrels, and with contempt for American society, which we saw as depraved.” A Newsweek article from the same year reads, “These students don’t read Marx, they read Camus…If they are rebels they are rebels without an ideology, and without long- range revolutionary programs. They rally over issues, not philosophies, and seem unable to formulate or sustain a systematized political theory of society, either from the left or right.” The primary focus of the students groups – and the new-left in general – is focusing on action instead of ideas (theory). According to the new-left, the change demanded on any particular issue does not have to be integrated with an overall theory. This view is nicely captured by a CBS documentary (June, 1965) when it interviews a student activist leader who said, “We learned that there are no absolute rules, we make the rules for ourselves.” Absolute rules would be theories or systems. If a theory or system would inhibit what a particular student felt to be right then to hell with the theory! The new-left finds systematized ideas (Marxism, classical-liberalism, religion) stifling. That is why an advocate of the new-left said (quoted in the SEP article above) “We don’t spend endless hours debating the nature of Soviet Russia or whether Yugoslavia is a degenerate workers’ state.” To guide your actions by a –system- of thought means that some actions are ruled off limits or at least viewed as very bad. Eschewing the policy of grounding a view in an overall system, the new-left argued for the radical atomism of each moment and each policy.
But a moment of reflection will reveal that this view cannot be consistently advocated and it was especially unwise for it to be advocated by the new-left in their particular context. Let me explain both of these statements.
First, this view cannot be consistently advocated because it is self-refuting. It is tantamount to arguing that argument should be rejected – a contradiction. Let me elaborate on this for a moment. An argument is a discourse where separate parties give reasons for their views. The reasons are used to justify the assertion being defended. So, for example, I could defend free- speech because it is morally wrong to bar someone from speaking their mind. The assertion is that free speech should be defended and the reason is that it is morally wrong to forbid it. (This process can, of course, get very complicated). But the entire framework of argument, the concept of giving supporting justification to a view in order to defend it, is a system based on a theory and it is theories that the new-left is claiming should be discarded. So, for example, if we were in an argument and you give reasoned statements for your view what is to keep me from clapping my hands, doing a dance and claiming I have won the argument? Well, you will say that I have not presented reasoned claims for my view. But then I will claim that I don’t believe in your theory of argument – in fact I don’t believe in theories at all but in concrete action and, in this case, the concrete action I thought best was to clap and dance. Thus, the dialogue is over.
Moving to the second reason, it would have been positively suicidal for the new-left to advocate it. If argument is appealing to a theory and theories are discarded, then argument is discarded. How, then, will disputes be settled? If they cannot be solved by dialogue there are two options. First, that the parties will go their separate ways. But the new-left was not interested in going its own way. They explicitly wanted to make changes in the system. Thus, the second method: force (the Weather Underground Organization was the most well known violent new-left group). But, obviously, a rag-tag group of students couldn’t advocate force as a means of achieving their views. They were not a match for the local police much less the national-guard or army.
Thus, while on the surface the new-left may advocate an anti-ideology (theories//systems are bad) and violence, they needed the aid of an ideology to make their point. They got their aid from Herbert Marcuse.
While Marcuse said that he did not like the fanfare the new-left was showering him with he did speak out on behalf of the movement many times. It makes sense that the students would look to him for intellectual support. Marcuse was a prime target because his earlier works, such as “Eros and Civilization” (1955), fit the students libertine disposition but also because in 1964 Marcuse published “One Dimensional Man” which explicitly stated that the students will have an important place in revolutionizing civilization.. But, I think more importantly, Marcuse’s fundamental view is that it is the place of a group of enlightened individuals (presumably him, his followers and the student-rebels) to tell the rest of civilization how to act. But Marcuse’s notion of what it is to be ‘enlightened’ is, as I hope to show, bizarre. Marcuse’s intellectual training became apparent when he completed his dissertation on Hegel in 1931. Thus, to understand the backdrop of Marcuse’s views I want to give a brief summary of Hegel’s views.
Hegel is one of the most famous philosophers ever. His view was that the world, as well as the mind, is governed by, what he called, dialectical law. According to dialectical law, an original state of affairs develops through the confrontation between contradictions. For Hegel, the fundamental “contradiction” is rooted in self-consciousness. Self-consciousness longs for absolute freedom. Self-consciousness desires its wishes to have mental power over reality. It wants imagination to rule. However, it finds itself confronted by an indifferent universe. Self-consciousness must be content, then, with being able to shape reality through thoughtful action.
The original state of affairs is self-consciousness. Self-consciousness is consciousness of a reality that does not yield to wishes or imagination. However, the mind is not impotent. Although it cannot transform the state of affairs simply by thinking, it can transform the state of affairs by thoughtfully acting. Thus, a new state of affairs is brought about: a state where thoughtful action synthesizes pure self-consciousness and pure indifferent reality. So far so good. But the true key to dialectical thinking is to recognize that this is not a final step. Instead, it is only one stage.
In each successive stage of the dialectic, self-consciousness is forced to develop by confronting that which is foreign to it. In the case above, thoughtful action recognizes that it only has a finite amount of time to act before death. But, as in the first example, this is not an end to the developmental process. Instead, this provides another moment for the dialectical law to exert its force. Thoughtful action does not have to resign to death. Instead, it can synthesize death into itself resulting in a new, deeper and richer position --- for example, the desire to redouble one’s efforts and not waste time or the desire to create something that will persist through history. The above is a brief summary of Hegel’s account of dialectical law. The critical point to keep in mind is the fact that a mere documentation of the ‘facts’ – what I illustrated above as ‘indifferent reality’ is never the whole truth. The whole truth must take into account the teleological character of self-consciousness. It must keep in mind that self- consciousness inherently strives to overcome those things that act as obstacles. It is this aspect of Hegel’s thought that Marcuse makes much of.
In “One Dimensional Man”, Marcuse bemoans the fact that Science dominates contemporary industrial civilization. Marcuse is bothered by the fact that society seems to be more concerned with what there is than with what there should be. A One-Dimensional-Man is man that has given up, or at least largely ignored, the critical aspect of his nature – the aspect that allows him to recognize not just what is but what ought to be. Scientific activity, whether it is physics or economics, concerns itself with facts and the theories based on those facts. The average man is dominated by the ‘empirical’ world view and a resulting fascination with what there is (i.e., consumer goods) instead of what there should be. For Marcuse this is not a good mode of being for a human. What is, then?
The proper mode of being a human is to adopt is nothing but Hegel’s view of self- consciousness. This view, again, is one that avoids the problem of a short-sighted fixation on what there is (science) that is typical of a one-dimensional-man. Instead, it emphasizes the importance on what ought to be.
This focusing on the ought is often called the ‘critical’ attitude. Marcuse’s emphasis on the ‘critical’ aspect of the human being meant that his concern was by default ‘revolutionary’. This does not mean that any particular method of revolution was mandated by his philosophic base but only that what is was always viewed in relationship with what ought to be and thus the status-quo was subject to an un-ending criticism.
What, in particular, did he criticize? Almost everything. Marcuse implicated empiricism, science, capitalism, democracy and even things such as free-speech in his criticism. In a simple – so simple it is close to trivial – sense we can see his point: Science is not ethics. Science will tell you how to build a nuclear bomb but it will not tell you what to do with it. Science can give you Auschwitz. Etc. The solution to this is, indeed, to link science with a program of ethics. But this is trivial. When the Americans dropped the bomb there was, of course, an ethical standard associated with the decision to do so. Likewise, Hitler and the Nazi’s had a very explicit and precise ethical program that fueled their war and their holocaust. All examples in history will demonstrate that Marcuse’s claim that science operates outside of ethics is absurd. The One-Dimensional-Man is simply a myth. His point may be, however, not that science is operating without ethics but that it is operating without the ‘right’ ethics.
Thus, the question immediately arises: What does Marcuse claim the ‘right’ ethical system is and how does he demonstrate that it is, in fact, the right system? Marcuse’s basic claim is that the right ethical system is the system that is based on the essence of man. In this case, the essence of man means the realization of reason (with reason ‘properly understood’). What this ‘realization of reason’is is not very clear and in One- Dimensional-Man it never makes itself more transparent. In his book “Reason and Revolution” he claims that the realization of reason can’t be concretely imagined because it is always changing with the historical process. In another of his books, “Eros and Civilization” he claims that the realization of reason is a civilization where sensualist//libidinous behavior permeates all things to bestow the benefits of pleasure on all aspects of life. In his essay, “Repressive Tolerance” he states that the realization of reason is making sure that those whose version of the “realization of reason” is not ‘actually’ the realization must be subject to violence and repression. But still, in not one case is there a clear articulation of what his abstract standard means.
Faced with this difficulty, Marcuse pulls out the standby of all tongue-tied philosophers: intuition. There are a few who, as a result of “…methodic intellectual meditation” will know by “intuition” the correct ethical system (One Dimenstional Man p126). Or, “The question, who is qualified to make all these distinctions, definitions, identifications for the society as a whole, has now one logical answer, namely, everyone 'in the maturity of his faculties' (read: everyone who has the right intuitions) as a human being…” (Repressive Tolerance).
This emphasis on intuition, in the words of a famous Marxist-Scholar is: “Marcuse combines contempt for science and technology with the belief that we must strive for higher values because all the problems of material welfare have been solved and commodities exist in plenty…In this respect Marcuse is typical of the mentality of those who have never had to trouble themselves to obtain food, clothing, housing, electricity, and so on, as all these necessities of life were available ready-made. This accounts for the popularity of his philosophy among those who have never had anything to do with material and economic production. Students from comfortable middle-class backgrounds have in common with the proletariat that the technique and organization of production are beyond their mental horizon: consumer goods, whether plentiful or in short supply, are simply there for the taking. Contempt for technique and organization goes hand in hand with a distaste for all forms of learning that are subject to regular rules of operation or that require vigorous effort, intellectual discipline, and a humble attitude towards facts and the rules of logic. It is much easier to shirk the laborious task and to utter slogans about global revolution transcending our present civilization and uniting knowledge and feeling…Marcuse’s…program is…to destroy democratic institutions and tolerance in the name of a totalitarian myth, subjecting science and technology to a nebulous ‘essential’ intuition which is the exclusive property of philosophers hostile to empiricism and positivism.”
While I have tried to give you a picture of the kinds of ideas Marcuse advocates, this short summary really can’t portray it. Suffice it to say that quotes such as “It should be noted that Marcuse’s demands go much further than Soviet totalitarian Communism has ever done…” are not uncommon or, in my view, unfounded.
globalization is not good for everyone/ the weak will die and the strong will consume/ it's a game we've been playing/ pretending to even out the field/ but everybody knows only one belly gets filled/ but it's more complicated than that/ because the weak don't have a choice/ what can one do when they come knockin' with their guns/ there's only one way out and it's to get guns yourself.
On January 29 2010 15:24 ItchReliever wrote: globalization is not good for everyone/ the weak will die and the strong will consume/ it's a game we've been playing/ pretending to even out the field/ but everybody knows only one belly gets filled/ but it's more complicated than that/ because the weak don't have a choice/ what can one do when they come knockin' with their guns/ there's only one way out and it's to get guns yourself.
I wonder how did the world get to a 6 billion population, if globalization is such a zero-sum game as you say...
I have some questions for those who believe in privatizing and deregulating everything:
1) Would you want all parks and national parks privatized? If so, would there be anything to stop billionaires and corporations buying them up and preventing their access by the public forever? Would you consider this a good thing? What about public libraries, should they all be privatized too? What if they are bought by private companies, who start charging for books? Would you consider that a good thing?
2) What about air and sea pollution? The argument usually is that private land ownership can prevent pollution, because you can't pollute other people's land, but what's to stop Ajax Chemicals from spewing as much filth as they want into the air and the sea if there is no government regulation?
3) If privatization and deregulation is so beneficial why was Naomi Klein (in the 'Shock Doctrine' ) able to find so many (well-researched) examples, in a variety of countries, where such programs resulted in impoverishment for the majority of the population and only benefited small business elites? Why was it necessary for many of the countries who pushed such programs to kidnap and torture trade unionists and others who opposed such measures and why were the measures often introduced in very undemocratic ways (ie in Chile after a military coup)?
4) Apparently privatization is always supposed to make things more efficient, right? If that's the case, how come when the NZ government sold off it's railway system (Tranzrail) to an Australian company they ran it into the ground, reinvesting none of their profit back into the infrastructure but instead just taking the profits overseas? How come the NZ government was eventually forced to buy back the railway system because it was being run in such a shoddy way? How do the free market purists account for this?
5) For many years NZ's banks were all private-owned, there were several banks, so according to free market theory, they should have been competing to give the consumer the best deal, right? How come instead of that they uniformly charged similar high fees? How come it was only when the NZ government created a government-owned bank to compete with the private-owned banks and began winning customers from them with lower fees that they reluctantly began lowering their fees?
If all government enterprises are so inefficient how is it that the NZ government-owned bank is able to charge lower fees than the other banks but still turn a profit?
Isn't it possible that in some cases when several big corporations control almost 100% of the market, rather than competing with each other on prices and service, they will actually find it more profitable to collude on keeping prices high and the consumer will lose out?
I'll answer you to the best of my knowledge but first I'd like to ask. Why is it that I have to make the case for individual liberty, and not the state that has to make the case for oppression? The state hasn't come to the world first, you know. Privatizing is taking property away from the state, to someone who can actually use it to the best of his or her ability...
On January 29 2010 13:03 lixlix wrote: I will again emphasize the danger of economics theory as a science. People should stop thinking of statistics based economics theory as a science.
Science is testable, replicable, and produced through experiment. Statistics based economics is not. Rather it is often a pattern fitted to a set of data, that all too often is statistically too small a sample size.
Austrian Economics is Praxeological. We do not derive our theories from statistics, but from logic and reason.
And this is one of Austrian Economics great failings. It´s closed logical system where everything fits, very much like Marxism. And, like Marxism, it has very little to do with reality.
F.ex. there´s no empirical evidence that free-markets do work. Every single industrialised nation has more or less followed the same pattern, heavy state intervension to protect local industries from global competition, be it the US, Europe, Japan, S-Korea, et.c.
According to Austrian School state intervention decreases productivity, lessens GDP et.c., but how do you then explain the fact that the Scandinavian countries, where there´s enjoy almost as much GDP as the US? Can it be that there are other factors than the raw "homo economicus"-ones that affect economic prosperity, say trust and democratic empowerment; social capital, or universal health-care? Can it be that a big democratic state that actually cares for it´s citizens will actually on the whole boost the GDP? And not that GDP should be the main focus, it´s an ambigious concept that should take second place to happiness and self-empowerment in society.
Now, I havent read all your posts(it´s a long thread) so if you´ve touched upon these issues I appoligise. Consider this little rant more of a criticism on lazze-faire capitalism and Austrian School economics.
In my mind, economics is positivistic 19th and 20th century bs; believing that you can quantify human behaviour down to a exact science. The Austrian School and lazze-fair capitalism took this false preachingsand turned itinto a religion.
Actually, the austrian school pretty much agrees 100% with your whole last paragraph. If you were to study a little bit of praxeology you would find out...
Edit: I could explain a little bit I guess, before I go to sleep. Value is subjective. Man acts on his evaluations. GDP and other aggregate measures of economy do not account as to what is happening to each men. You cannot aggregate happiness after all, as you said.
Austrian economics does not argue empirically that government intervention hurts the economy, it argues through a bottom-up deductive logic from praxeological axioms. Whether the empirical data confirms or not the theories of austrian economics is irrelevant as no induction is part of the main pillars thereof. Certainly it's a bonus that they've been right predicting numerous governmental fuck-ups, but they take no pride in that (or at least they shouldn't...)
The reason why, or one of the main reasons at least, government intervention in the market is "bad", or goes against voluntary trade, in a few words, is because government cannot calculate what the consumers want, and what the sellers can supply. Only consumers and sellers can settle their negotiations to the full extent of their "wants" and "haves". Once government starts meddling in that, forcing them to do this or that, the trade deviates from its original path, and no assertions after-the-fact can be made whether such trade was good or not, since neither the seller's nor the buyer's evaluations were able to be fully used. Only the central planner's values of how he thinks it should be are realized.
While I don't think all of OP's arguments are wrong per se, I think the majority of them are simplistic.
Some of them, like the issue of dumping and monopolies having unfair advantage, are already recognised by pragmatic governments which have anti trust laws and anti dumping laws in place. I don't think there's a whole lot of argument there.
Others are superficially correct, but ignore the other side of the argument. For instance, this whole argument that a good company will become a monopoly and then have inefficiencies. That is a fact. But what he doesn't say is that when the inefficiencies get bad enough, other (smaller!) companies find an opening to compete. Some industries are seen as harder to compete in than others because of the high barrier to entry (railroads, telecoms etc.). However, technology is helping that case.
For instance, India's fixed line telecommunications market is pretty much monopolised by a state run enterprise. That monopoly leads to inefficiency, as OP pointed out. However, India's mobile phone market is one of the cheapest and fastest growing in the world, because small private companies saw a way to exploit the inefficiencies of the fixed line monopoly. It was made possible through technological developments, which in a way are also spurred by inefficiencies in the capitalist economy.
Another example of a simplistic argument is that American workers have to compete with low paid Chinese workers, while ignoring the fact that the vast majority of Americans are very happy to buy cheap made in China products. Nobody's forcing them to do it. They do it because they like it. I don't think banning Chinese imports would make a lot of Americans very happy. I could just as well say, what's the use of having a job when you can't afford to buy anything?
Besides, you're pretty much saying, "these guy want to work in comfortable conditions, want short working hours and want a lot of money. And I don't want you to employ that other guy who's willing to bend over backwards to make you happy" Forget about the average American, Goldman Sachs wouldn't employ someone who said that! Heck, you wouldn't even get married to someone who said, "I'm fat because I don't want to work out, I'm poor because I don't want to work and I want you to support me. Don't go for that other girl who's rich and'll give you a blow job every other day."!
OP also ignores the fact that America has benefitted greatly from globalisation in the export department. It's exported its entertainment, its manpower, its technology, its weapons, its aeroplanes and a whole bunch of other stuff that require highly skilled American labour that other countries just can't compete with. However, the fact that the whole world buys certain products from America provides more employment for American workers. And these are blue collar workers, mind you, working to put together Boeings.
There are many more simplistic arguments, I won't go through all of them because I don't have time. However, for a more balanced view I would suggest the OP read "Economics - Making Sense of the Modern Economy", edited by Simon Cox and published under the Economist label. For an easier read I would suggest "The Undercover Economist" by Tim Harford.
Ultimately, nobody denies that pure capitalism does not work. As many have pointed out, you can have state intervention to curb the worst excesses and still have a well functioning state. You need, for example, the state to set aside money for things that benefit the entire population, but which most are too short sighted to support (roads, telephone networks). You also need the state to set aside money to pay for things that don't generate income per se, but which are necessary for a state to function (police force, army, education).
However, the reasons for pure capitalism not working are not many of those OP lists, and his vague notion that "we need change" is no solution either.
We should also draw a line between capitalism, privatisation and anarchy. A lot of people are implying that deregulation = no laws whatsoever when most people would see deregulation as cutting through red tape. Sometimes it goes too far, as we've seen in this latest economic meltdown. However, even the most diehard supporter of deregulation would say that yes, there still need to be rules and regulations to stop CEOs from hiring hitmen to murder their rivals.
I have several comments to make on this large and thought provoking post.
The theory of free market economics, where supply and demand seek an equilibrium at the best price point, is a fine theory. The problem is that there are no free markets in which to test the theory, all are subjected to manipulation by regulators, large players and insider traders.
That markets will tend towards monopolies or oligopolies is well recognised by economists and governments have sought to prevent or encourage this at various times. Although often undesirable, monopolies are not necessarily destructive. Steel production in Australia is monopilised by one super large player under government encouragement. If there were many small steel producers they would not be able to survive in Australia's limited market for steel - leaving Australia without a steel industry and subject to foreign price rorting.
The current system of pricing goods does not input the environmental or social costs of production. These costs are borne by the rest of the world and not the purchasers of any particular commodity. I think that focussing on the price of goods is a good indication of efficiency, the problem is that all the costs of production are not included in the price.
That a corporate entity is permitted to partake of the political conversation of a democracy is, in my opinion, a scandal. A democracy is government by the people (the demos) with one vote that has one value, and entities without voting rights are no part of that demos. Lets call it a plutocracy and use the correct descriptive for a system of government where the moneyed class (stock holders) get a vote at the ballot box and another in a back room in Washington (or Canberra, London, Paris etc). Back rooms are by their nature hidden from the public eye and the proceedings that take place there are not subject to scrutiny by the demos.
Seutonius mentions an incident from the life of the Emperor Vespasian. An engineer presented to the Emperor the plans for a labour-saving device that would revolutionise heavy transport, greatly reducing costs. Vespasian is said to have paid the engineer hansomely for his invention but refused to impliment the new technology saying "you must allow me to feed my poor commons". That is, the Emperor preferred to maintain people in jobs rather than have them unemployed and the cost savings were forgone. This Roman morality could be profitably applied in the West's current unemployment dilemma.
While there are certainly problems with market economies involving abuse of market power, I can not agree with what the author is talking about.
Are you telling me that you'd return to a protectionist, non-trading world because AMERICANS don't get paid absurd amount of money for blue collar work anymore? (eg. car production)
The world is a big place, and you'd rather wipe out the economic growth of China and India, which had its income more than double in the past two decades? You'd rather leave them unemployed subsistence farmers that can't afford anything better than a hand built hut? I guess they don't matter because they aren't 1st world persons and thus of no concern. (are the yellow man even human?) Now you could take a leaf out of some radical left's play book and say that yes, they'd be better off being subsistence farmers over the dirty and hard work in a sweatshop. However, the workers inside obviously disagree and have shown their disagreement with direct action.
Arguments that automatically define Americans as more worthy of high wages that is not earned by merit compare to the rest of the world is not one I or any reasonable person can support.
If you want to make more money, simply be better and produce more and better shit. Blaming other people for working harder while demanding less is just plain simply absurd.
How can such racist and nationalist views be moral?
-------------------- I'm not going to talk about monopolies and such since it is a recognized and worked upon problem. The whole thing about investment is based on appeal to emotions too, since companies do invest in new technology and products despite how much the top of their management gets paid sometimes.
I liked how so much of his rhetoric is belief based instead of evidence based.
Actually that brings me to the part of this I find the most interesting. Id like to expand on the part he made in the middle about borrowing from Peter to pay Paul. What he and infact most in the political realm miss is that all of politics is transfering priority from one value to another. You want small government, fine. Here are the advantages and disadvantages of that system. You want large government, fine. Here are the advantages and disadvantages of that system. There is very little universally best answer.
So what does this all come down to? How do you decide what to do? Values. That explains why so much of these debates has the charectoristics of religious or philosophical arguements. You have two sides living in different worlds. If I am on mars and you are on venus how can we possibly agree what color the planet is. Now given that our realities are value based in both observation and conclusion how should politics be approached? First by excercising radical respect and focusing on understanding the othersides values and where your values could possibly overlap with them. And second by using evidence based dialog with the understanding that interpretation is colored by preexisting values.
TLDR: What we see today in the political sphere is a reflection of the course religous ideology took in the earlier chapters of human history. You begin at different places and that cannot be changed. But that does not mean coexistance is not possible.
3) If privatization and deregulation is so beneficial why was Naomi Klein (in the 'Shock Doctrine' ) able to find so many (well-researched) examples, in a variety of countries, where such programs resulted in impoverishment for the majority of the population and only benefited small business elites? Why was it necessary for many of the countries who pushed such programs to kidnap and torture trade unionists and others who opposed such measures and why were the measures often introduced in very undemocratic ways (ie in Chile after a military coup)?
I'm sorry. I was reading your questions and took them seriously until I read this. I'll engage in ad hominem here and just say that Naomi Klein is the most BS leftist w*o*e (fill in the blanks) on the face of the earth. Her backtalking Milton Friedman is one of the most disgusting things I've come across in my entire life.
To answer your questions I'll just take a shortcut and claim that free market reforms have been successfull where they have been applied. This includes Sweden, USA, India, China, Hong Kong, Japan, South Korea and so on.
I don't get how you can't see that some of your examples are just kind of... irrelevant. If a nation has a state controlled railway infrastructure and then sell it to a company, there's no guarantee whatsoever that the company will perform good.
That said, I don't think there is any one perfect system. And I really don't think there are that many people who believe in total deregulation and laissez-faire. What most people should be able to agree on is that concentration of power is bad.
Besides, the finance industry was already regulated. There were already thousands of regulators on Wall Street and yet they couldn't see it coming. So what makes you think that further regulation would do any good? It might seem the most easiest solution; but does it actually work?
3) If privatization and deregulation is so beneficial why was Naomi Klein (in the 'Shock Doctrine' ) able to find so many (well-researched) examples, in a variety of countries, where such programs resulted in impoverishment for the majority of the population and only benefited small business elites? Why was it necessary for many of the countries who pushed such programs to kidnap and torture trade unionists and others who opposed such measures and why were the measures often introduced in very undemocratic ways (ie in Chile after a military coup)?
I'm sorry. I was reading your questions and took them seriously until I read this. I'll engage in ad hominem here and just say that Naomi Klein is the most BS leftist w*o*e (fill in the blanks) on the face of the earth. Her backtalking Milton Friedman is one of the most disgusting things I've come across in my entire life.
To answer your questions I'll just take a shortcut and claim that free market reforms have been successfull where they have been applied. This includes Sweden, USA, India, China, Hong Kong, Japan, South Korea and so on.
I don't get how you can't see that some of your examples are just kind of... irrelevant. If a nation has a state controlled railway infrastructure and then sell it to a company, there's no guarantee whatsoever that the company will perform good.
That said, I don't think there is any one perfect system. And I really don't think there are that many people who believe in total deregulation and laissez-faire. What most people should be able to agree on is that concentration of power is bad.
Besides, the finance industry was already regulated. There were already thousands of regulators on Wall Street and yet they couldn't see it coming. So what makes you think that further regulation would do any good? It might seem the most easiest solution; but does it actually work?
Lol nice post. I mean it's total crap, but nice in the sense that it shows you to be an ignorant idiot.
How's that for an ad hominem?
Let's keep this civil, please. We've been doing well so far. Just because someone doesn't agree doesn't make them stupid.
3) If privatization and deregulation is so beneficial why was Naomi Klein (in the 'Shock Doctrine' ) able to find so many (well-researched) examples, in a variety of countries, where such programs resulted in impoverishment for the majority of the population and only benefited small business elites? Why was it necessary for many of the countries who pushed such programs to kidnap and torture trade unionists and others who opposed such measures and why were the measures often introduced in very undemocratic ways (ie in Chile after a military coup)?
I'm sorry. I was reading your questions and took them seriously until I read this. I'll engage in ad hominem here and just say that Naomi Klein is the most BS leftist w*o*e (fill in the blanks) on the face of the earth. Her backtalking Milton Friedman is one of the most disgusting things I've come across in my entire life.
To answer your questions I'll just take a shortcut and claim that free market reforms have been successfull where they have been applied. This includes Sweden, USA, India, China, Hong Kong, Japan, South Korea and so on.
I don't get how you can't see that some of your examples are just kind of... irrelevant. If a nation has a state controlled railway infrastructure and then sell it to a company, there's no guarantee whatsoever that the company will perform good.
That said, I don't think there is any one perfect system. And I really don't think there are that many people who believe in total deregulation and laissez-faire. What most people should be able to agree on is that concentration of power is bad.
Besides, the finance industry was already regulated. There were already thousands of regulators on Wall Street and yet they couldn't see it coming. So what makes you think that further regulation would do any good? It might seem the most easiest solution; but does it actually work?
Lol nice post. I mean it's total crap, but nice in the sense that it shows you to be an ignorant idiot.
How's that for an ad hominem?
Let's keep this civil, please. We've been doing well so far. Just because someone doesn't agree doesn't make them stupid.
I apologise. His response of "Naomi Klein is a BS leftist whore, and thats all I'll say about that" made me see red.
On January 30 2010 00:39 SWPIGWANG wrote: While there are certainly problems with market economies involving abuse of market power, I can not agree with what the author is talking about.
Are you telling me that you'd return to a protectionist, non-trading world because AMERICANS don't get paid absurd amount of money for blue collar work anymore? (eg. car production)
The world is a big place, and you'd rather wipe out the economic growth of China and India, which had its income more than double in the past two decades? You'd rather leave them unemployed subsistence farmers that can't afford anything better than a hand built hut? I guess they don't matter because they aren't 1st world persons and thus of no concern. (are the yellow man even human?) Now you could take a leaf out of some radical left's play book and say that yes, they'd be better off being subsistence farmers over the dirty and hard work in a sweatshop. However, the workers inside obviously disagree and have shown their disagreement with direct action.
Arguments that automatically define Americans as more worthy of high wages that is not earned by merit compare to the rest of the world is not one I or any reasonable person can support.
If you want to make more money, simply be better and produce more and better shit. Blaming other people for working harder while demanding less is just plain simply absurd.
How can such racist and nationalist views be moral?
-------------------- I'm not going to talk about monopolies and such since it is a recognized and worked upon problem. The whole thing about investment is based on appeal to emotions too, since companies do invest in new technology and products despite how much the top of their management gets paid sometimes.
I'm sensing a lot of angry Asian man syndrome here. Would it make you feel better if I told you I'm Chinese?
And there's nothing wrong with wanting to keep jobs in the country. How many people would be happy about losing their job just because it let someone else feed their family? I don't think you understand the role of government here. It's not to make Chinese and Indian nationals better off. It's to make Americans better off. Why the hell would I want my tax dollars and my patronage to pay for jobs overseas?
All in all, your accusation of racism is pretty ridiculous.
I took quotes from many different posts this time: Having spent more time reading about the Austrian school of Economics, Austrian Business Cycle Theory and watching the embedded videos, I have to agree with:
And this is one of Austrian Economics great failings. It´s closed logical system where everything fits, very much like Marxism. And, like Marxism, it has very little to do with reality.
This criticism of Austrian comes up again and again from mainstream economists. There is no empirical evidence, let alone any solid empirical work (no, articles in the Journal of Austrian Economics don’t count as solid empirical work) to support ABCT.
Go on Youtube and type in: Peter Schiff was Right I liked how so much of his rhetoric is belief based instead of evidence based
.
Peter Schiff to me is very representative of the argument style put forth by the proponents of Austrian theory here on TL. He makes a lot of statements that sound good (and say many things I agree with), but does not back them up with solid evidence. Its one thing to say: “The recession is the central bank’s fault for holding interest rates artificially low”, and quite another to prove it.
Austrian Economics is Praxeological. We do not derive our theories from statistics, but from logic and reason. Value is subjective. Man acts on his evaluations. GDP and other aggregate measures of economy do not account as to what is happening to each men. You cannot aggregate happiness after all, as you said.
Maybe I am missing something big. But to me, praxeology seems essentially identical to what is assumed in mainstream economics (Rationality).
Furthermore, saying statistics is neither logic nor reason is ridiculous. The careless way you dismiss econometric work makes me wonder how much, if any, experience you have with it.
First and foremost let me say, that to throw away the wealth of knowledge of the ages is such a travesty and arrogance of the first order I cannot comprehend the mindset one must be in to tell 500 years worth of Economic history and theory that they were all wrong, too stupid
Then why are you yourself apparently so dismissive of mainstream economic thought? I also wonder how much experience you have with this too. This may seem like an attack, but I assure you, it isn't. You seem very well read, and to have an inquiring mind (and you post sources for me to look at!). It just that I, having had a education firmly grounded in mainstream economics, cannot so readily dismiss it. Did you receive an economics degree based in mainstream economics? Did you later shift to the Austrian school? Or is the study of economic theory something you pursue in your own time? I would be interested to learn how your beliefs on this came to be.
(To preempt your inevitable follow up question, I have a B.A. in Economics from a top, private, liberal arts school. (Doesn't everyone on the internet? Take it or leave it I guess...) My primary course of study focused on international trade and international macroeconomics. The views espoused in these courses were consistent with current mainstream thought. I took many classes in mathematics, statistics, and econometrics, to ensure that a graduate program in economics remained an option. Since graduating, I have instead decided to pursue law instead of economics)
Oh, let me hit on your interest rate fallacy. Again I must point out your inflation fallacies I will quickly quip though, that you still do not understand the foundational basis for interest rates, and how they are calculated. The easiest thing to know about interest rates, is that it is both an incentivization tool, and a coordination tool for entreprenuers
My “fallacy” is to view interest rates and inflation rates in the same manner as the majority of other economists in the world?
Your fallacy is not understanding the Cantillon Effect. I have put the links in my post there for you, from both Cantillon and Mises.
As for the Cantillon Effect(s), there are many instances in mainstream economic thought where government intervention is seen as a bad thing. I think the reason Cantillon Effects aren’t taught as “Cantillon Effects” is that he argues any government intervention in interest rates is bad. (whereas mainstream economic thought argues only using the type of policy is bad).
Econometrics which is all statistics, cannot be a basis for a theory. You cannot explain an event using statistics. I think everyone knows the quip about statistics. In the general sense, statistics cannot tell you what caused the statistics, in that, you cannot derive for example, the subjective marginal utility of one person from another on a simple formula.
What is your background in statistics? Statistics can be used as the basis for a theory. You can very easily explain events using statistics. To say otherwise is patently absurd. Running the simplest economic regressions provides proof that statistical analysis has a great deal of value. Without statistics and modeling, there is no way to determine whether a given theory has merit in the real world. (Many economic theories have merit theoretically, but fail miserably at producing an accurate portrayal of the world)
How come the Austrians did, and have done so in the past? How many times do you have to get it wrong, and Austrians get it right before you start to accept our theories.
This argument strikes me as similar to the way Peter Schiff speaks. That is, with making use of any empirical evidence. It isn’t just me that is rejecting your theories, but the collective body of mainstream economic thought. I think the most convincing argument against the Austrian School is that it is NOT part of mainstream economics. The leading economists in the US are extraordinarily brilliant people. Almost certainly more intelligent than either you or I. That they don't believe in the Austrian School suggests strongly to me that it is fundamentally unsound. If the Austrian School were as correct as you make it out to be, don’t you think its ideas would have been accepted by the best economists?
Also, you fail to realize that many other economists, outside of the Austrian School, have also predicted these events. It appears to me that you are engaging in selective sampling (but, of course, statistics aren’t logical).
Finally, you seem to have ignored my links to articles criticizing the Austrian school of thought.
So, perhaps instead of reading them you could answer the following: (it would help if you could provide a clear explanation for each, rather than one or two sentences)
1. How does the Austrian school explain the co-movements of investment and consumption? To me it appears as though ABCT implies changing levels of investment, but not changes in production decisions.
2. It seems to me that investors in ABCT must necessarily be irrational. To invest in the manner suggested by ABCT they must necessarily ignore expectations about the future, and invest solely based off of CURRENT interest rate signals. Do you agree or disagree?
3. How do you explain empirical results suggesting that no tendency for entrepreneurs to respond to lower interest rates by reallocating resources between orders of goods need exist? (The paper is in the SSRN, so I don't know that you will have access, but see: "Some Capital-Theoretic Fallacies of Austrian Economics" by Vienneau.
4. What is the Austrian response to Friedman’s empirical work testing the validity of ABCT? He finds, once in 1969, and again in 1993, that the ABCT is false.
5. What is the Austrian explanation for business cycles before the creation of the central bank?
6. What about the belief that, since the use of modern Monetary Policy, the business cycle has become less severe in its ups and downs? The historical graphs showing this has indeed occurred?
7. Lastly, I would be interested to hear what the Austrian School’s response to empirical evidence regarding the welfare of nations. More specifically, that those countries with interventionist central banks, high taxation, and large welfare states have historically outperformed those countries without them.
8. I am still uncertain as to the current Austrian view of money. It seems like some Austrian economists view money as neutral, while others do not. Could you tell me what the current Austrian view on money is?
9. Austrian theory hinges on the presence of a reserve fractional banking system. Can you say, in all honesty, that this system is bad? Consider how excruciatingly difficult it would be for any person or company to receive a loan. In particular, how would large projects ever receive funding?
You also didn’t reply to my criticisms of the gold standard:
10. There is much less gold than currency today. If you eliminate fractional reserve banking, and tie money to a gold standard (or any other commodity) the value of gold will necessarily skyrocket. This would limit its use in current applications and goods. Do you not see that as a problem?
11. I understand that Austrians wouldn’t bemoan a central bank deprived of its ability to conduct Monetary Policy, but what do you say to claims that the gold standard exacerbated the Great Depression by limiting the ability of the bank to expand credit? Please respond with something more than “the Great Depression occurred because the Central bank kept interest rates too low in the 20’s” (that is my problem with Peter’s arguments...)
12. The Austrian school would prefer to have monetary policy determined by the rate of gold production? A rate that is so unpredictable? (consider that gold production is dependent on finding sites to mine it, and the discovery of a new mining site would constitute a large shock).
13. To end with a question more oriented toward you: Why do you think Austrian Economic thought is not mainstream? Why do so many economists reject it? If it really explained things well, don’t you think it would have been accepted?
I know that's a lot of questions, and perhaps some of them may seem obvious or dumb, but I would appreciate it if you could answer them.
In short: I agree with a great deal of the things I have read and seen so far regarding the desired end results. I think Peter is correct that we need to stop spending and increase the savings rate. I agree that more legislation is usually the wrong course of action to take. I agree that competition and failure are necessary and beneficial to the system.
What I disagree with is the method for getting there. I don’t believe ABCT provides a credible solution.
On January 29 2010 20:47 The Storyteller wrote: While I don't think all of OP's arguments are wrong per se, I think the majority of them are simplistic.
Some of them, like the issue of dumping and monopolies having unfair advantage, are already recognised by pragmatic governments which have anti trust laws and anti dumping laws in place. I don't think there's a whole lot of argument there.
Others are superficially correct, but ignore the other side of the argument. For instance, this whole argument that a good company will become a monopoly and then have inefficiencies. That is a fact. But what he doesn't say is that when the inefficiencies get bad enough, other (smaller!) companies find an opening to compete. Some industries are seen as harder to compete in than others because of the high barrier to entry (railroads, telecoms etc.). However, technology is helping that case.
For instance, India's fixed line telecommunications market is pretty much monopolised by a state run enterprise. That monopoly leads to inefficiency, as OP pointed out. However, India's mobile phone market is one of the cheapest and fastest growing in the world, because small private companies saw a way to exploit the inefficiencies of the fixed line monopoly. It was made possible through technological developments, which in a way are also spurred by inefficiencies in the capitalist economy.
Another example of a simplistic argument is that American workers have to compete with low paid Chinese workers, while ignoring the fact that the vast majority of Americans are very happy to buy cheap made in China products. Nobody's forcing them to do it. They do it because they like it. I don't think banning Chinese imports would make a lot of Americans very happy. I could just as well say, what's the use of having a job when you can't afford to buy anything?
Besides, you're pretty much saying, "these guy want to work in comfortable conditions, want short working hours and want a lot of money. And I don't want you to employ that other guy who's willing to bend over backwards to make you happy" Forget about the average American, Goldman Sachs wouldn't employ someone who said that! Heck, you wouldn't even get married to someone who said, "I'm fat because I don't want to work out, I'm poor because I don't want to work and I want you to support me. Don't go for that other girl who's rich and'll give you a blow job every other day."!
OP also ignores the fact that America has benefitted greatly from globalisation in the export department. It's exported its entertainment, its manpower, its technology, its weapons, its aeroplanes and a whole bunch of other stuff that require highly skilled American labour that other countries just can't compete with. However, the fact that the whole world buys certain products from America provides more employment for American workers. And these are blue collar workers, mind you, working to put together Boeings.
There are many more simplistic arguments, I won't go through all of them because I don't have time. However, for a more balanced view I would suggest the OP read "Economics - Making Sense of the Modern Economy", edited by Simon Cox and published under the Economist label. For an easier read I would suggest "The Undercover Economist" by Tim Harford.
Ultimately, nobody denies that pure capitalism does not work. As many have pointed out, you can have state intervention to curb the worst excesses and still have a well functioning state. You need, for example, the state to set aside money for things that benefit the entire population, but which most are too short sighted to support (roads, telephone networks). You also need the state to set aside money to pay for things that don't generate income per se, but which are necessary for a state to function (police force, army, education).
However, the reasons for pure capitalism not working are not many of those OP lists, and his vague notion that "we need change" is no solution either.
Thanks for taking the time, Storyteller. I'd agree with your analysis that my OP was simplistic.
On monopolies, I wanted to illustrate how the rhetoric of free market was inherently wrong. Like you said, a pragmatic gov't knows these things are a danger and takes regulatory steps to stop it. BUT, as this thread has already shown, there are a lot of people out there who don't think there's anything wrong with monopoly or think that no monopoly could ever exist for long.
Also, when you look at the banking industry now, you see a trending towards monopoly. If it weren't for this crisis, people would still be clamoring for more deregulation, more free market principles etc. It's only now with the populist outcry that Obama is making noises about breaking up banks so that they can't be "too big to fail." That's why I think the rhetoric of deregulation and free market are very dangerous. Hence, why my OP highlighted monopolies as a very real danger. The Libertarians obviously completely disagree with my views.
On, smaller companies entering the market to compete, the problem I see with that is the monopolizing entity can create huge barriers to entry. So, even if they're inefficient, they can just kill the competition from ever entering. This doesn't happen on it's own of course. There is a relationship here between the monopolizing entity and the government. With the recent strike down of the McCain-Feingold law, this opens the doors to corporations interfering in government. Therefore, the monopolizing entity can use the government as a tool to increase barriers to entry for competitors. So, while they will be inefficient, this does not mean they are inefficient to the point of being dysfunctional. They still generate a profit--a massive one due to monopoly--and can then utilize some of these resources to keep the industry closed to competition.
An easy example to use would be your India example. Cell phones broke up that monopoly, but that didn't occur by better efficiency, it was caused by technological progress. What if the monopolizing company had instead caught on to the possibility of cell phone technology and used their money to bribe the government into awarding them sole rights to cellular tech within their borders? They would then make it impossible to break the monopoly. While one can say "that wouldn't happen though," I have seen it happen several times exactly that way. A monopoly, which uses its money to garner government support to maintain their monopoly.
In the end, I think you misinterpreted the point of my OP. It was not to say that capitalism is evil. It was to say the political rhetoric of deregulation = efficiency is bad. AKA The Republican crap being espoused currently in mainstream America. Government = inefficient and terrible. Private sector = best.
The problem is the Republican rhetoric is so screwed up because they don't believe in Austrian economics like Rothbardian is espousing, instead they want the current mixed economy just with no taxes on the rich and no regulation of what private corporations do, while keeping all kinds of government subsidies and incentives for themselves. Which is, in essence, nothing but the complete rape of the middle and lower classes.
On January 30 2010 05:15 ZeroJumps wrote: I took quotes from many different posts this time: Having spent more time reading about the Austrian school of Economics, Austrian Business Cycle Theory and watching the embedded videos, I have to agree with:
And this is one of Austrian Economics great failings. It´s closed logical system where everything fits, very much like Marxism. And, like Marxism, it has very little to do with reality.
This criticism of Austrian comes up again and again from mainstream economists. There is no empirical evidence, let alone any solid empirical work (no, articles in the Journal of Austrian Economics don’t count as solid empirical work) to support ABCT.
Go on Youtube and type in: Peter Schiff was Right I liked how so much of his rhetoric is belief based instead of evidence based
.
Peter Schiff to me is very representative of the argument style put forth by the proponents of Austrian theory here on TL. He makes a lot of statements that sound good (and say many things I agree with), but does not back them up with solid evidence. Its one thing to say: “The recession is the central bank’s fault for holding interest rates artificially low”, and quite another to prove it.
Austrian Economics is Praxeological. We do not derive our theories from statistics, but from logic and reason. Value is subjective. Man acts on his evaluations. GDP and other aggregate measures of economy do not account as to what is happening to each men. You cannot aggregate happiness after all, as you said.
Maybe I am missing something big. But to me, praxeology seems essentially identical to what is assumed in mainstream economics (Rationality).
Furthermore, saying statistics is neither logic nor reason is ridiculous. The careless way you dismiss econometric work makes me wonder how much, if any, experience you have with it.
First and foremost let me say, that to throw away the wealth of knowledge of the ages is such a travesty and arrogance of the first order I cannot comprehend the mindset one must be in to tell 500 years worth of Economic history and theory that they were all wrong, too stupid
Then why are you yourself apparently so dismissive of mainstream economic thought? I also wonder how much experience you have with this too. This may seem like an attack, but I assure you, it isn't. You seem very well read, and to have an inquiring mind (and you post sources for me to look at!). It just that I, having had a education firmly grounded in mainstream economics, cannot so readily dismiss it. Did you receive an economics degree based in mainstream economics? Did you later shift to the Austrian school? Or is the study of economic theory something you pursue in your own time? I would be interested to learn how your beliefs on this came to be.
(To preempt your inevitable follow up question, I have a B.A. in Economics from a top, private, liberal arts school. (Doesn't everyone on the internet? Take it or leave it I guess...) My primary course of study focused on international trade and international macroeconomics. The views espoused in these courses were consistent with current mainstream thought. I took many classes in mathematics, statistics, and econometrics, to ensure that a graduate program in economics remained an option. Since graduating, I have instead decided to pursue law instead of economics)
Oh, let me hit on your interest rate fallacy. Again I must point out your inflation fallacies I will quickly quip though, that you still do not understand the foundational basis for interest rates, and how they are calculated. The easiest thing to know about interest rates, is that it is both an incentivization tool, and a coordination tool for entreprenuers
My “fallacy” is to view interest rates and inflation rates in the same manner as the majority of other economists in the world?
Your fallacy is not understanding the Cantillon Effect. I have put the links in my post there for you, from both Cantillon and Mises.
As for the Cantillon Effect(s), there are many instances in mainstream economic thought where government intervention is seen as a bad thing. I think the reason Cantillon Effects aren’t taught as “Cantillon Effects” is that he argues any government intervention in interest rates is bad. (whereas mainstream economic thought argues only using the type of policy is bad).
Econometrics which is all statistics, cannot be a basis for a theory. You cannot explain an event using statistics. I think everyone knows the quip about statistics. In the general sense, statistics cannot tell you what caused the statistics, in that, you cannot derive for example, the subjective marginal utility of one person from another on a simple formula.
What is your background in statistics? Statistics can be used as the basis for a theory. You can very easily explain events using statistics. To say otherwise is patently absurd. Running the simplest economic regressions provides proof that statistical analysis has a great deal of value. Without statistics and modeling, there is no way to determine whether a given theory has merit in the real world. (Many economic theories have merit theoretically, but fail miserably at producing an accurate portrayal of the world)
How come the Austrians did, and have done so in the past? How many times do you have to get it wrong, and Austrians get it right before you start to accept our theories.
This argument strikes me as similar to the way Peter Schiff speaks. That is, with making use of any empirical evidence. It isn’t just me that is rejecting your theories, but the collective body of mainstream economic thought. I think the most convincing argument against the Austrian School is that it is NOT part of mainstream economics. The leading economists in the US are extraordinarily brilliant people. Almost certainly more intelligent than either you or I. That they don't believe in the Austrian School suggests strongly to me that it is fundamentally unsound. If the Austrian School were as correct as you make it out to be, don’t you think its ideas would have been accepted by the best economists?
Also, you fail to realize that many other economists, outside of the Austrian School, have also predicted these events. It appears to me that you are engaging in selective sampling (but, of course, statistics aren’t logical).
Finally, you seem to have ignored my links to articles criticizing the Austrian school of thought.
So, perhaps instead of reading them you could answer the following: (it would help if you could provide a clear explanation for each, rather than one or two sentences)
1. How does the Austrian school explain the co-movements of investment and consumption? To me it appears as though ABCT implies changing levels of investment, but not changes in production decisions.
2. It seems to me that investors in ABCT must necessarily be irrational. To invest in the manner suggested by ABCT they must necessarily ignore expectations about the future, and invest solely based off of CURRENT interest rate signals. Do you agree or disagree?
3. How do you explain empirical results suggesting that no tendency for entrepreneurs to respond to lower interest rates by reallocating resources between orders of goods need exist? (The paper is in the SSRN, so I don't know that you will have access, but see: "Some Capital-Theoretic Fallacies of Austrian Economics" by Vienneau.
4. What is the Austrian response to Friedman’s empirical work testing the validity of ABCT? He finds, once in 1969, and again in 1993, that the ABCT is false.
5. What is the Austrian explanation for business cycles before the creation of the central bank?
6. What about the belief that, since the use of modern Monetary Policy, the business cycle has become less severe in its ups and downs? The historical graphs showing this has indeed occurred?
7. Lastly, I would be interested to hear what the Austrian School’s response to empirical evidence regarding the welfare of nations. More specifically, that those countries with interventionist central banks, high taxation, and large welfare states have historically outperformed those countries without them.
8. I am still uncertain as to the current Austrian view of money. It seems like some Austrian economists view money as neutral, while others do not. Could you tell me what the current Austrian view on money is?
9. Austrian theory hinges on the presence of a reserve fractional banking system. Can you say, in all honesty, that this system is bad? Consider how excruciatingly difficult it would be for any person or company to receive a loan. In particular, how would large projects ever receive funding?
You also didn’t reply to my criticisms of the gold standard:
10. There is much less gold than currency today. If you eliminate fractional reserve banking, and tie money to a gold standard (or any other commodity) the value of gold will necessarily skyrocket. This would limit its use in current applications and goods. Do you not see that as a problem?
11. I understand that Austrians wouldn’t bemoan a central bank deprived of its ability to conduct Monetary Policy, but what do you say to claims that the gold standard exacerbated the Great Depression by limiting the ability of the bank to expand credit? Please respond with something more than “the Great Depression occurred because the Central bank kept interest rates too low in the 20’s” (that is my problem with Peter’s arguments...)
12. The Austrian school would prefer to have monetary policy determined by the rate of gold production? A rate that is so unpredictable? (consider that gold production is dependent on finding sites to mine it, and the discovery of a new mining site would constitute a large shock).
13. To end with a question more oriented toward you: Why do you think Austrian Economic thought is not mainstream? Why do so many economists reject it? If it really explained things well, don’t you think it would have been accepted?
I know that's a lot of questions, and perhaps some of them may seem obvious or dumb, but I would appreciate it if you could answer them.
In short: I agree with a great deal of the things I have read and seen so far regarding the desired end results. I think Peter is correct that we need to stop spending and increase the savings rate. I agree that more legislation is usually the wrong course of action to take. I agree that competition and failure are necessary and beneficial to the system.
What I disagree with is the method for getting there. I don’t believe ABCT provides a credible solution.
Thanks for the reply. I will try and get back to you as soon as I can.
PS: I'm currently about halfway through my B.S double major in Economics and Philosophy and minor in Finance.
I've never been a Neo-Classicist, Monetarist, or Keynesian because I have always been a strict logical type. To me, their arguements are so fallacious, to be laughable. Such was Keynes to say that his theory about market ups and downs and growth was due to animal spirits, and that savings didn't matter because we are all dead in the long run. This is who the current Orthodoxy follows! Secondly, I will make a quick point that mainstream Economists don't support Austrian Economics because if they did they would be out of a job. Most work at places like Goldman Sachs, JP Morgan, the Federal Reserve, etc. So, of course they are not going to follow Austrian Economics and nor will the Government because the Government likes to have a monopoly! They feed off each other. Besides, since when did consensus become the measuring stick of what is right or wrong?
Mind you Keynes also contradicted his Interest rates theory between Treatise on Money and General Theory. Interest rates are if not the most important part of an Economy, are second only to the type of currency.
On January 28 2010 04:32 StorkHwaiting wrote: It's a provocative title I know. But it's exactly what I want to debate. FIERCELY.
I consider myself very well learned in economics theory, and I think I can address all of the concerns you raise in your post.
Before I do that, though, I want to ask you a question, OP:
Why did you start this thread? Is it because you want to prove to the ignorant masses why capitalism and globalization are wrong? Or is it because you want to have an actual discussion on this topic?
In other words- were I to make a post that addressed your concerns decently, would you read it with an open mind? Writing a proper reply to this would take a considerable amount of time, and it's a spectacular waste of time to argue with someone who's not willing to listen.
On January 28 2010 04:32 StorkHwaiting wrote: It's a provocative title I know. But it's exactly what I want to debate. FIERCELY.
I consider myself very well learned in economics theory, and I think I can address all of the concerns you raise in your post.
Before I do that, though, I want to ask you a question, OP:
Why did you start this thread? Is it because you want to prove to the ignorant masses why capitalism and globalization are wrong? Or is it because you want to have an actual discussion on this topic?
In other words- were I to make a post that addressed your concerns decently, would you read it with an open mind? Writing a proper reply to this would take a considerable amount of time, and it's a spectacular waste of time to argue with someone who's not willing to listen.
Hi Zato, I'd love to hear your opinions on the matter. I definitely am open to listen. I said some provocative things, more to air my views atm, not that they were any inherent "truth." As you'll see throughout the thread, I've accepted I'm wrong on certain points multiple times and am open to any philosophy other than: "Capitalism made the modern world. So if you don't like it, go back to Medieval times," which is an answer that lacks a certain nuance.
But yes, if you wrote something I think everyone would be interested in reading it, me being one of them.
Kusimuumi If any of you is actually interested about the subject, and wishes to devote a few weeks reading and doing the neccessary fact checking, I wholeheartedly suggest you to read "The Web Of Debt" by Ellen Hodginson Brown. (revised and expanded with 2008 update)..... This is important enough to mandate its own thread, but I don't want to be too pushy.
I very much like the civility of your tone, so I apologize in advance if the following comes off too harshly:
Ad hominem attacks are generally a poor way to begin a debate, but in this particular case, I think one bears stating. Ellen Hodgson Brown’s credentials (from her own site) are: using “her research skills developed as an attorney practicing civil litigation”. She does not have a background in Economics. Furthermore, she states that she was “asked to join the legal team of a popular Tijuana healer”. That experience prompted her to trace the “suppression of natural health treatments”. She has written 11 books on alternative medicine.
I think, on the basis of such facts alone, that anything she has to say about US monetary policy can be summarily discounted.
Nevertheless, I read several of the excerpts from her book just to make sure. One particular gem:
Except for coins, all of our money is now created as loans advanced by private banking institutions — including the private Federal Reserve. Banks create the principal but not the interest to service their loans. To find the interest, new loans must continually be taken out, expanding the money supply, inflating prices — and robbing you of the value of your money.
This statement is indicative of the thoughts contained within the rest of the excerpts. If she had any economic background in Monetary Policy, or even Macroeconomics, she would realize how foolish statements like these sound.
Except for coins, all of our money is now created as loans advanced by private banking institutions –
Money is not created by the Federal Reserve. Money is created by the United States Mint. One of the ways many governments actually service debt is by printing money. (which is the opposite of creating money as a loan...) In fact, many unstable governments (and even some stable ones) have printed too much money too pay for their debts, devaluing there currency entirely. This is known as hyperinflation.
What the Federal Reserve deals in is US debt. The Federal Reserve either buys or sells government bonds (debt) to pursue expansionary or contractionary monetary policy. When the Federal Reserve sells a bond, it is issuing debt. When it buys a bond, it is reducing debt. These vehicles effect the money supply as follows: when the Reserve buys a bond with hard currency, that money is injected into the economy (expansionary). When the Reserve sells a bond for hard currency, money is taken out of the economy (contractionary).
The Federal Reserve displays aspects of both a public and private nature. It is public in the sense that it is within the government, and its members are appointed by other branches of the government. I tend to think of it much like the Supreme Court. It is private in the sense that it is not responsible to any branch of the Federal Government.
It should be extremely intuitive to see why this must necessarily be so. If politicians could order the Reserve to pursue the monetary policy they wanted, the result would be disastrous. You needn’t look beyond this forum board to see just how poor most people’s grasp of economic theory is (I don’t intend that to be a personal attack).
Banks create the principal but not the interest to service their loans. To find the interest, new loans must continually be taken out, expanding the money supply, inflating prices —
This part is just silly. Banks create the principal for their loans? Principal is the value of a loan minus the accrued interest (or the original balance of a loan. It doesn’t make any sense to say banks create the principal for their loans. That’s like saying you create the principal for your car loan because you took out a loan for your car.
As for not creating the interest: How would one even do that? What does that even mean? Why would anyone take out a loan if they could “create the principal” and could “create the interest”.
I think this part is a very poor (read unintelligent) take on the service of National Debt. The US issues more debt to finance its current debt (sort of like paying one credit card off with another).
While it is correct to say that if one does this, new loans must continually be taken out, the idea that it is “expanding the money supply, inflating prices” is just plain incorrect. When the Federal Reserve issues debt (Sells bonds), money is TAKEN OUT of circulation. This contracts the money supply (which is the opposite of “expanding the money supply). This raises the value of your currency, deflating prices.
This is another extremely common populist outcry that is the bane of many an economist’s existence. Inflation does not “rob” people. It is not evil. Unpredictable high levels of inflation may sometimes be problematic, but the inflation rate in the US is very stable.
Your money is indeed worth less every year in the US as a result of inflation. But so is everyone else’s. Periods of unexpectedly high inflation hurt lenders, because it reduces the effective real interest rate (the total amount of debt is lower in real terms). Similarly, such periods help borrowers (like every American family, ever) because now their effective real debt burden is lower. When inflation is unexpectedly low, the reverse is true. To combat this, most loans are indexed to inflation. One final note: Inflation actually harms the wealthy most of all, because of the poor interaction between US capital gains tax laws with inflation (look at IRS capital gains tax law relating to inflation).
To conclude: Every single paragraph in the excerpts I read is exactly like this. Every sentence is simply not true, or contentious. If you want to choose a book to learn more about Monetary Policy, I would suggest getting an actual textbook. Romer or Mankiw are traditional favorites.
The problem with books like this is that the writers begin writing with an agenda. They start with an idea, and then set out to prove it. This leads to biased, inaccurate writing. What you will find in textbooks is simply an accounting of how economic policy works. Not politics, not an agenda.
If you have any questions about this, I would be happy to answer them.
1. Judging a book by its cover, or an investigative author by her degree, is not a good idea to start an argument. I frequently discuss complex concepts with researchers without having a formal degree in their field, and can hold short lectures in fields which I have no formal education in. You just need to have the right people to work with whom you can ask about the hard parts, and the rest will follow. The President of a country, for example, can't know everything. That's why he has a board of advisors to help him/her. The same naturally goes for investigative journalists and authors alike. The fact that you judged the subject based on this shows inherent bias. Since you have an education in economics, the knowledge that Milton Friedman openly supported the views of the person who wrote the foreword might soften your landing a bit.
2. the "Federal Reserve", indeed is private. See Lewis v. United States, 680 F.2d 1239 (9th Cir. 1982). It is there in clear text. The largest owner (53%) is the Federal Reserve Bank of New York. Whose largest shareholders, in turn, are the big banks you hear about in news all the time, with ownership largely concentrated to the few behemoths.
3. Most of the money is not created by the US mint, vast majority of it is purely in digital form.
4. The paragraph means that banks create the loan by a bookkeeping entry. They don't actually use deposited money to cover this. However, this new money doesn't cover the interest which is tied with the loan. Thus new loans must be taken in order to generate the money to pay back the loan. (Modern Money Mechanics; basis of fractional reserve banking)
5. You seem to have no idea how money is created; the US government issues interest bearing bonds, which are bought by the fed and used as the reserve to create money to the system through fractional reserve banking. Thus, the US government ends up in debt for the money created, and needs to pay insurance. This is why the US national debt and M3 (no longer published since 2006) have increased hand to hand, when all this could be debt free if it was government in control of the money instead of _Private_ Fed whose altruism might be more questionable than that of the Government to its people.
While im sure you have a sound base knowledge in economics, especially in the theory, you should be careful not to push down other people purely based on the assumption that you are correct, but instead you should do some research.
The way you word your arguments sounds plausible (because your fundamental theory is solid), and people who follow the conversation might think you are right in _all_ your arguments regarding the subject. This, sadly, is not the case here, and because of that you have merely added to the already thick layer of disinformation hovering around the subject. If you do not think more carefully about what you say, and which opinions you bash down, you risk planting a cancerous seed of misinformation in the community's pool of knowledge.
While im sure (atleast hope so, your account was afterall created the same day of the reply) you don't do this on purpose, I hope you revise your behaviour in the future in order to be of more assistance to your community and the people around you. Nobody wants to be fed information that turns out to be wrong later on. Unlearning is a difficult process, and having a seed of disinformation planted in you can cause an otherwise sound logic reach the wrong conclusions.
Instead of giving answers to issues you are unfamiliar with, or which seem ridiculous in the first glance, you should be asking questions. Be open to new ideas (remember, nobody knows everything, and everyone has corrupt information in their head) and show respect to others, especially when you're new in the community. You'd be surprised how swallowing one's pride and forgoing the effort to 'seem smart to others' enhances the capability to learn. If you wish to learn, spend more time asking questions and be open to new information.
I suggest you read the book from front to back. It has notes to cover the controversial issues, and you've got a basin of information in your usage to see whether or not they hold true. It is ideal for a person like you, who has acquired vast knowledge on the Theory of Economics.
I hope you take a moment to chew this and then find an appropriate reply whose tone is hopefully away from the belligerence seen in the quoted material.
Splendid. I'll do my best to lay all your concerns in the OP to rest, then:
On January 28 2010 04:32 StorkHwaiting wrote: Now, the way I see it, what's currently taught in economics and finance classes in America is this concept of globalization, free market, capitalism, and less taxes/regulation = increased economic prosperity.
I want to go ahead and say that's crap.
First, one of the central tenets of modern capitalism is this concept that the "free" market leads to benefit for everyone. They think that things naturally move to an equilibrium in demand/supply/price if left alone. The rationale for this is that people, with enough info, are perfectly rational beings that make the best choices.
The problem with this theory is it doesn't account for the destructiveness of monopolies. In business, anytime a group has either grown or merged into a large enough economic body, they can start to implement destructive strategies like dumping a ton of their products at a very cheap price onto a foreign market and wrecking the local competition. This is validated by capitalism and the free market because this is merely a strategy to increase market share, and if they have the resources to engage in such an act, then they have every right to.
Over the span of a few years, this group demolishes the local competition and creates a monopoly. Then they jack up the prices a ton and win back all the profits they gave up with this strategy. Except once they've recouped their investment, they continue to do it perpetually. This is a win-lose scenario. Yet, it's an example of what happens on the "free" market. This doesn't lead to constant competition and cheaper prices/higher quality for everyone. This leads to a stagnant market where one giant is in control and sells at exorbitant prices because they are the controllers of all supply.
Alright, first to straighten some things out. You say capitalists claim that the free market leads to benefit for everyone. This is actually not true. If you define well-being according to Pareto efficiency (a Pareto efficient allocation is a situation in which no one can be made better off without at least someone else ending up worse off), Capitalism and the free market will often not be able to provide a Pareto improvement, at least in the short run. Capitalism has never been about getting something for nothing- you win some, you lose some. Ideally, you win more than you lose. How can you measure this?
The graph above characterizes a market with 1 producer, and any number of consumers. The producer is the only one around because there is a law that prohibits others from competing with him. The Supply curve (the producer's marginal cost) and the Demand curve (The consumer's willingness to pay for an item) will determine the price level and the quantity of units sold in this market.
One of the great things about the market (indeed, THE great benefit of the market), is that with specialization, other people can produce some goods more efficiently than you. Instead of having to make everything yourself, there is specialization and division of labor, which means everyone produces that which they're more efficient at producing, and there's more of everything for everyone. So while in the graph you can see that for a quantity of 1 unit, the producer is willing to sell this unit for $10, that unit is worth $34 to the consumer- if this exchange is made, there will be a net gain of $24 between them. As more units are sold, this net gain increases, but it increases more slowly with each marginal unit, until the market arrives at the equilibrium (in this case, a quantity of 7 and a price of $22). This net gain can be visualized here:
Where the green area represents the net gain for consumers (willingness to pay - price, for each unit) and the yellow area represents the net gain for the producer (price - marginal cost, for each unit). What does the free market say? The free market says, why have one producer, when you can have two? Let's see what happens if we strike down this law that limits the market to one producer, assuming both producers have the same marginal costs:
The marginal cost rises more slowly, you get a lower equilibrium price ($18) and a higher equilibrium quantity (9). The Consumer net gain rises from $42, in the case of 1 producer, to $72 in the case of 2 producers; the Producer net gain falls from $42 to $36, however. Not only that; since there are 2 producers now, that net gain is split in half between them. Clearly, the first producer does NOT benefit from capitalism and a free market in this case. The economy as a whole, however, does benefit.
Through a better allocation of resources and competition, the free market will create more wealth for the system as a whole. It never has, and never will, offer the most wealth and benefits to everyone individually.
Moving on, capitalism does NOT assume that everyone is perfectly rational. What it assumes is that, as far as the market is concerned, people will act as though they were perfectly rational, profit-maximizing individuals. In other words, that when offered two products of the same quality, they will choose the cheaper one; that if they prefer A to B and B to C, they will therefore prefer A to C; that generally, having more is better for them. As far as the predictive capabilities of the model are concerned, if people do in fact behave as though they were profit-maximizing agents (and they usually do), then that's good enough.
As to monopolies, what we have here is a semantics problem. Look up what Free market means; in that definition, the following is contained: "Through free competition between vendors for the provision of products and services, prices tend to decrease, and quality tends to increase". Competition is actually central to the concept of free market. You say a company from country A will devastate the local industry of country B with its flood of cheap imports. Well, if the cost of buying stuff from country A is cheaper than that of producing it in country B, then that's all the better.
Ah, but once country A has all the market, they will charge monopolistic prices, you say. So, what's to prevent cheaper competition from country A, B, C or D taking a swipe at that market and plunging it right back into competition? Nothing. This will be the natural state of things. In fact, if you look at examples of monopolies, you'll find that they are almost always either:
a) Monopolies created by law. The legislation prevents others from competing with you, or b) Natural monopolies.
If a monopoly has been created by regulation, you can hardly blame capitalism and the free market for it. If it's a natural monopoly, things get trickier, because the standard set rules of capitalism simply do not apply (much as they don't apply for other industries, such as providing national security or providing intellectual property goods- I can analyze these further on another post if someone would like). Economics makes some basic assumptions about free markets, and one of these assumptions doesn't hold in the case of natural monopolies.
The assumption that doesn't hold, is that competition will drive prices down if the current supplier is charging significantly more for the good than it would charge under competition. The reason why it doesn't hold are entry costs. Let's say, for instance, that you're an electrical company, and you own all of the energy production facilities in the US, all of the electric posts in the US, and all of the wiring on said posts. Producing energy costs $10 a kilowatt, and you charge $15 for each. (disclaimer: as far as I know, those prices are grossly unreasonable, but that shouldn't matter for this example)
Another company realizes that you're charging too much. They think that if they entered the competition, they could take fully half of the market share. However, since there are economies of scale in the production of energy, producing half as much energy would cost $12 a kilowatt, instead of $10. Due to these decreasing costs, there'll be a brutal fight for market share- the bigger the market share, the lower the costs, the bigger the profit. Both of them will lower prices as much as possible, and will end up charging the same $12 per kilowatt that it costs to produce one. They're making practically no money. And here's the kicker: The new company would also have to produce a huge number of energy production facilities, electric posts and wiring, just to be able to compete. The other company realizes that, fuck this, it's not worth it. You can read more on Natural Monopolies, but the bottom line is: the basic free market theory makes a set of assumptions. Sometimes these assumptions don't hold, such as in the case of Natural Monopolies. In these cases, the only thing you can do is take these limitations into account, and tweak the system in order to compensate for them as well as you can. Economics has several second-best type solutions for Natural Monopolies.
On January 28 2010 04:32 StorkHwaiting wrote:
In capitalism, it's theorized that the only way to combat this is for another giant group to emerge. Yet, this sort of competition doesn't help at all. While the two giants are growing, they experience economies of scale and their efficiency increases. Yet, once they reach a certain size, they start to experience the DISeconomies of scale from being too bloated. But they have to continue this arms race, because if they try to scale back, the other one will have the advantage in buying power for that short window of time and can steal more market share, thus perpetuating an advantage until the guy who stepped back first is destroyed.
This creates an effect where giants are constantly forced to grow bigger to compete, even though in the long run it leads to a net loss in efficiency. This is what the free market creates.
As you said, there's an issue of economies of scale and diseconomies of scale at stake. But really, unless you get a particularly dramatic case (those of natural monopolies, which usually involve water and electricity supply), the market equilibrium is not a monopoly, but rather competition. You can see that in consumer goods all around you.
On January 28 2010 04:32 StorkHwaiting wrote: The problems with this are obvious. This is why countries have effected protectionist policies to defend against these sorts of aggressive economic strategies. Then you no longer have a free market. It becomes mixed. Our world is full of mixed economies.
The last 30 years of economics in the USA and the world, is a constant attempt to try to bring down these protectionist strategies on the belief that free market was more efficient and beneficial for all. Peep the giant economic collapse we just had. It's pretty obvious to everyone now that this free market liberalization was a horrible idea. It destroyed local industries, it gutted nations, it destroyed whole swathes of industry in nations, and all it really did was lower the retail prices of goods.
Protectionist policies are usually motivated by something else. Remember, at the start, when I mentioned that the free market won't give the highest possible benefit to everyone? That's the central issue at stake here. Country A is a developed nation; they're more efficient at making cars and computers. Country B is a developing nation; they're more efficient at making food. Country A's farmers happen to be politically powerful, and demand protectionism from the 'ravages of the free market'. Country A's politicians cave in, and grant the protectionism; Country A's farmers are better off. Country A's politicians are better off. Everyone else is worse off. The economy, as a whole, is worse off. That's protectionism, in a nutshell. When politicians tell you otherwise, they either don't know what they're talking about (most likely), or they're lying through their teeth.
On January 28 2010 04:32 StorkHwaiting wrote: What use are lower prices when you don't have a job?
That's the problem with the concept of free market. It's too focused on price of goods as a barometer for efficiency. It fails to address the issues of labor and wages. Now if you try to approach the labor market using capitalist and free market principles, you end up with sweatshops in China and India.
Does anyone honestly think it is a good thing to compete with sweatshop workers in terms of pay/productivity?
Of course not. Let them work their workshops, we'll do something else. Let them make your sneakers and T-shirts, we'll give them financial services and computers. That's the whole point of division of labor and international trade; we save money on things that others can produce more cheaply. If an American isn't willing to work for $5/hour working a sweatshop, let him work on an alternative. If you give me the unemployment argument- "But he can't find a job!"-, then realize that while we are, in fact, not employing some people when we import goods, we are employing more people when we export goods. Exporting means that we're selling our leftovers overseas- and producing those leftovers (which may very well be the bulk of the production) required a large number of workers that wouldn't have been needed if those extra goods weren't going to be exported. If you give in to the protectionist fear of losing jobs, then other countries will likely reciprocate this protectionism, and people will lose their jobs in industries your country is more efficient at, while others gain jobs in industries your country is less efficient at. Maybe you'll even gain more jobs than those you lost. But economics can usually give far cheaper alternatives for reducing the unemployment rate in a country.
On January 28 2010 04:32 StorkHwaiting wrote: There is only one real way to improve labor's market value, which is training that improves their productivity. Yet, the sad truth of the matter is that even with a great education, a large proportion of the population is not that clever. They can't really be trained that far past the level of a sweatshop worker. This is what's traditionally known as "retail sector" or "blue collar."
This makes up a pretty large percentage of the world population. Yet, the blue collar workers in America don't want to work in sweat shop conditions. Capitalism and the free market tells us that the smart thing to do is just tell those blue collar workers to fuck off and move the factories to China.
This is not true. How are you going to get a chinese worker to cut your hair in America, or take your order in McDonald's? Some tasks simply cannot be outsourced, it's like feeling your bladder about to burst and asking your cousin to take a leak for you.
Next point. If we give in to protectionism, most of these basic goods get more expensive. Drastically more expensive. For poor people, it isn't the same if they have to pay $10 for a shirt or $30. It isn't the same if they have to pay $5000 for a car or $15000. It isn't the same if they have to pay $2 for a meal or $5. Yes, people need jobs to buy these in the first place. But if the private sector in America can make 100m. jobs, why can't it make 110m.? Why not 130m.? There's no reason, really, other than we're currently in a pretty bad crisis. Unemployment was actually at a pretty good place before it. And protectionism won't help a whole lot in this respect.
On January 28 2010 04:32 StorkHwaiting wrote: This is why you see an increasing wealth disparity between the rich and poor in America. The poor have lost their jobs to the increasingly "free" labor market, whereas the rich and intelligent Americans have increased their value because they have some of the world's best education, coupled with some of the world's best tools of production.
AKA, the American factory worker must compete with the Chinese sweat shop worker.
Not true. While capitalism will increase the wealth disparity between the wealthiest and the poorest of a country, all of them will become wealthier over time. Compare Bolivia, Chile, and the US. Inequality is highest in the US, and lowest in Bolivia. Now, compare the living standards of the poorest in the US, to the living standards of the poorest in Bolivia, and you'll realize that the poor in the US are far, far better off than poor people in other countries. So is the problem inequality? Or is the problem the standard of living of the poor? Because Capitalism will improve the standard of living of everyone over time, the poor included- but it will never fix inequality.
On January 28 2010 04:32 StorkHwaiting wrote: The American Harvard graduate competes with the Chinese Beijing University graduate. Except the Harvard graduate gets to enter an organization like Goldman Sachs, with some of the world's best financial algorithms and the best financing and the best connections.
Therefore, while the free market has allowed the Harvard graduate to reach greater and greater heights by reaching the pinnacle of the financial world and reaping the benefits of competing vs the world due to massive, built-in advantages, the American factory worker has been laid off and can't find another job because he/she is now competing versus the 5 billion people of the developing world.
Do you guys see now why the free market is not helping the vast majority of America?
There's another, significant difference here. Capital to Personnel ratio. Since people in China are so damn cheap to hire, you're likely to have 10 dudes sharing a wrench doing a job that 1 dude in the US can do with a sophisticated piece of equipment. Case in point: Cars are produced both in the US and in China. The US has been an open economy for decades, and the unemployment went up just recently, coincidentally at the same time as the financial global crisis. There's just no way you're going to end up with half the blue collar worker population unemployed in the US; there's no international evidence suggesting this would happen.
On January 28 2010 04:32 StorkHwaiting wrote: And if you look at the labor markets, the greatest shift has been away from manufacturing and towards retail. Yet it's a nonsensical shift. How does it make any sense when the retail industry is driven by consumption, and the consumption is paid for by wages from the retail industry?
This is like saying, I get a job at Gamestop. Then I buy a ton of games from Gamestop. Eventually, Gamestop will expand because I'm buying so many games with my wages from them, that Gamestop's sales will be enough to expand.
It makes no sense. Money is constantly being pulled OUT of the economy this way. Every time you put $50 through the system, you end up with less. First, I get the job at Gamestop. They pay me $50. Yet, I pay income tax on that $50. It then becomes $42.
This $42 is then spent to buy a game. Yet I need to supplement it with another $8 from somewhere. So, already I'm at -$8. Okay, $50 + tax = $53. Now I'm at -$11.
Then Gamestop gets their $50 and has to pay corporate tax on it. So they're down to what? $40? A net of $-21 for a single transaction between retail to employee and back to retail.
So, in every transaction of $50 of wages going out of the system, we end up with only $29 of it going back in. It's rather obvious that the US labor/wage market can not be sustained by this type of relationship.
Um... yeah, because it's silly. You're ignoring the fact that the dude working at Gamestop is producing VALUE. Why? Well, game developers made a game. They have this awesome game! It's actually Starcraft 2. People want it. But the game developers have to sell it, they need a distribution network. They're willing to pay a fee for this distribution. If this person was hired by Gamestop for $50, then chances are his work has a value of at least $50. He's actually producing value, to the video game industry and to consumers.
On January 28 2010 04:32 StorkHwaiting wrote: The middle and lower classes cannot live much longer with these types of conditions. This is why there is a constant drain of money OUT of the middle and lower classes and INTO the upper classes.
The reason is because the tax dollars are being siphoned off. That $21 that was taken out is given to the government. Yet, the government we have today is increasingly controlled by corporations. According to current moral and economic philosophy, like that espoused by Jibba and others on TL, it's perfectly okay and constitutional for a corporation to get involved with government. On top of that, morals have no place in economic decisions. Therefore, it is completely okay for a corporation to try to pay to get laws passed that benefit the corporation.
What this means is that those $21 instead of going back into an industry that benefits the lower classes could be funneled into an industry that doesn't support hardly any of the middle-lower classes. Such as the banking industry! So, not only is the middle class losing jobs, competing with a vast number of foreign competitors, but they lose nearly half of every dollar to that mfing Harvard graduate. Because he/she is busy wheeling and dealing, screwed a bunch of people over with greedy "capitalist" ploys, and then needed a bailout.
This is how Main Street gets shafted.
Now, you're mixing up economics with politics. Is government funneling money to corporations bad politics? Yes. Is it bad economics? Er... no. It has nothing at all to do with economics. But believe me, protectionism won't fix this problem; good politics will.
On January 28 2010 04:32 StorkHwaiting wrote: On top of that, to the people who claim that of course the solution to all this is just get rid of taxes, I ask the question, ok, then where is the growth?
Sure, without taxes the $50 between me and Gamestop is cycled back and forth. Yet, that $50 will never grow. It remains $50. Therefore, even in the most ideal of circumstances, the money is not lost, it only remains the SAME. ZERO growth.
Growth isn't in wages. Growth is in production. If the same dude in Gamestop works harder, or with a better sales process in which he takes less time to attend each customer, or with a more efficient computer software, or whatever that allows him to do more of what he does in the same amount of time, then you're seeing growth. You're producing more value for the same cost.
On January 28 2010 04:32 StorkHwaiting wrote: In fact, accounting for inflation, you'd still see a loss of $1-2 each year. The industry continues to lose in a perfectly ideal situation. This is why the concept of consumer-based society leading to growth is total bullshit. You cannot grow an economy by spending money. That doesn't work.
Of course not. Consumption is merely a needed catalyst- growth is in production, but someone needs to consume those things that are being produced for production to make any sense.
On January 28 2010 04:32 StorkHwaiting wrote: The only way to grow the economic pie is technological innovation which decreases the cost of production. This way, I spend $50, Gamestop gets their $50 back. Yet, they have factories/studios that can produce the game for only $5. Therefore, they pay me $50, I buy from them for $50, they get back $45. They can then afford to make 9 more games. With 9 more games, they can make enough money back to hire 8 more workers. This way the loop continues.
Except somewhere in the loop, the business decides that instead, they're just going to pay all those profits to the CEO. We don't need to increase that many jobs. We'll just give it to the top guys. Therefore, once again the middle and lower classes are powerless to stop the flight of money from the consumer-supplier loop.
That's not how it works. The company cuts costs as much as it reasonably can- that way it can keep prices down and compete with everyone else. Leftover money goes to the owners, which can be a rich guy as much as a poor guy- the stockholders. Nothing prevents poor people from buying stocks as their savings. Why the hell would the company give the remaining money to the CEO? He's just another employee.
On January 28 2010 04:32 StorkHwaiting wrote: In pretty much every way, using capitalist and free market principles leads to a loss for the middle and lower classes. This is why Sarkozy says capitalism needs to be refounded to be more moral. That finance, free trade, and competition are a MEANS not an end. And it needs to be redefined and reinvented.
It's because morons run around trying to claim that the free market leads to increased efficiency and prosperity for all as long as everyone just makes decisions in a totally selfish manner. It doesn't. It doesn't work. The past 30 years have shown it doesn't work. It's led to disaster. The globalization and free market proponents were wrong. They did nothing but justify selfishness as a good thing.
Yeah yeah, political bullshit will always blame capitalism every now and then. I ask this of you, again: Do you care about the poorer people? Do you want them to have a better lifestyle? Now, look around the world. Look to the countries where the poorest people have it best. I assure you, its economic system will be capitalism, and that country will have significantly more inequality than poorer countries.
Your argument is correct in that capitalism creates inequality. This does not, however, mean the poor people are getting screwed over.
the fed may be privately owned but they're state-enabled. A private monetary institution issuing random pieces of paper would have no power if they weren't enforced as legal tender by the courts.
I got no problems with IOUs but the problem is not that they're debt-based but that they're monopolistic. The last guy who made the liberty dollars or whatever it was called got raided on that basis. The problem with the banking and monetary system is that there is no alternative but to join the cartel, so obviously they're going to be more laid back and irresponsible than if it was a free market to enter...
On January 30 2010 05:05 Rothbardian wrote: As long as we're going to have this discussion about the recent world mess, let's clear up some things. This will do the typing for me:
On January 30 2010 05:15 StorkHwaiting wrote: An easy example to use would be your India example. Cell phones broke up that monopoly, but that didn't occur by better efficiency, it was caused by technological progress. What if the monopolizing company had instead caught on to the possibility of cell phone technology and used their money to bribe the government into awarding them sole rights to cellular tech within their borders? They would then make it impossible to break the monopoly. While one can say "that wouldn't happen though," I have seen it happen several times exactly that way. A monopoly, which uses its money to garner government support to maintain their monopoly.
There are three things that usually prevent that from happening.
First off, bribery is illegal. That's why I think we need to draw distinction between deregulation, which makes it easier for everyone to do business, and anarchy, which makes it easier for the strongest to do business. If you run a business like the mafia, killing your enemies and bribing officials, then that's bad for competition. But it's not part of deregulation, that's anarchy, people breaking basic laws. While a monopoly bribing the government to keep in power does happen, we shouldn't forget that this is illegal, and isn't a failing of capitalism. It's more a failing of the government and legal system.
The second thing is that, the bigger a monopoly, the more incentive there is to break it. However, going head to head with it is usually a bad idea. Often, that spurs technological innovation to compete with a monopoly in a different way.
The third thing is, monopolies tend to be blind AND inefficient. In the Indian example, because it was a monopoly, the telecommunications firm didn't know and didn't care about mobile phones. Very often, while they're busily bribing... oops... lobbying officials to pass laws which they think will keep them where they are, someone else attacks them from a totally different angle.
There are quite a lot of big companies that have fallen that way. IBM vs. Microsoft, for example, Yahoo vs. Google, budget airlines vs. traditional carriers (the airline industry is one of the most sickeningly regulated, protected industries), railway companies vs. budget airlines...
With regards to the banks and all that, I'd say that comes under one of those things like the army or the environment. It's one of those things that need extra regulation because the state needs it to function well so in that case I agree with you.
On January 30 2010 05:15 StorkHwaiting wrote: In the end, I think you misinterpreted the point of my OP. It was not to say that capitalism is evil. It was to say the political rhetoric of deregulation = efficiency is bad. AKA The Republican crap being espoused currently in mainstream America. Government = inefficient and terrible. Private sector = best.
The problem is the Republican rhetoric is so screwed up because they don't believe in Austrian economics like Rothbardian is espousing, instead they want the current mixed economy just with no taxes on the rich and no regulation of what private corporations do, while keeping all kinds of government subsidies and incentives for themselves. Which is, in essence, nothing but the complete rape of the middle and lower classes.
Mmm... might need to make that a bit clearer. Definitions might be in order.
But at the end of the day, the debate is understandable because Economics is a very young, still evolving subject. As human societies change, the rules of Economics start bending. New situations arise which nobody has seen before. The rise of China and the sudden drop in inflation is one example. The banking crisis is another. So I do understand it when there is fierce debate about what should be done. Even economists can't agree what should be done, let alone politicians.
On January 28 2010 04:54 heyoka wrote: It always blows my mind that people think this is somehow edgy or provocative. Are there people out there who will argue against it?
hi zep!!!
I'd argue that knowing this is irrelevant because cultural influences make the knowledge rarified by default, which makes the ability to enact meaningful change through a system based on majority voting useless.
Its far easier to call michael moore crazy than to ask "well, why is flint so poor?".
More importantly, the concept of monopolization and the forces which lead to it are also VERY WELL represented in the parties that form our governments, which means that even if our institutions wanted to change, the forces against them will prevent them from doing so. Does anyone think they can found and lead a third party to national relevance in the next decade in the US? Does anyone see the success of the canadian conservative government stemming from the amalgamation of all prior right of center parties?
History is going to look back at us and kinda sigh "why didn't you guys examine the obvious evolutionary path of your institutions before letting them run wild?". Then again, this cycle is repeated pretty much ad nauseum throughout history, so we wont' be the only target of derision.
The information is fine and the discussion is valid. Framing it as LOOK GUYS I'M GONNA BLOW YOUR MIND ARE YOU READY TO BE SHOCKED AND PROVOKED I WILL CHANGE THE WAY YOU THINK ABOUT THE WORLD is ridiculous.
Heyoka, get over yourself. I never framed it as that. I think you're being rather immature. The debate is without a doubt provocative. Or else why would world leaders be needing a summit to debate this very issue? On top of that, the very first thing I posted was a link to Sarkozy's points, which I elaborate upon. Therefore, at the very start I am showing that my thoughts are neither original or something that is not already being discussed. I never said anything like "I'm going to blow your mind." Seriously, stop drinking the haterade. Just because I'm passionate about the subject doesn't mean that I think I'm some messiah here to save the masses.
Really disappointed you would take this approach to my writing.
I agree. If you want to contribute to a debate or discussion in a meaningful way, then argue for or against one's premises and/or conclusions. An ad hominem attack is not an argument.
3) If privatization and deregulation is so beneficial why was Naomi Klein (in the 'Shock Doctrine' ) able to find so many (well-researched) examples, in a variety of countries, where such programs resulted in impoverishment for the majority of the population and only benefited small business elites? Why was it necessary for many of the countries who pushed such programs to kidnap and torture trade unionists and others who opposed such measures and why were the measures often introduced in very undemocratic ways (ie in Chile after a military coup)?
I'm sorry. I was reading your questions and took them seriously until I read this. I'll engage in ad hominem here and just say that Naomi Klein is the most BS leftist w*o*e (fill in the blanks) on the face of the earth. Her backtalking Milton Friedman is one of the most disgusting things I've come across in my entire life.
To answer your questions I'll just take a shortcut and claim that free market reforms have been successfull where they have been applied. This includes Sweden, USA, India, China, Hong Kong, Japan, South Korea and so on.
I don't get how you can't see that some of your examples are just kind of... irrelevant. If a nation has a state controlled railway infrastructure and then sell it to a company, there's no guarantee whatsoever that the company will perform good.
That said, I don't think there is any one perfect system. And I really don't think there are that many people who believe in total deregulation and laissez-faire. What most people should be able to agree on is that concentration of power is bad.
Besides, the finance industry was already regulated. There were already thousands of regulators on Wall Street and yet they couldn't see it coming. So what makes you think that further regulation would do any good? It might seem the most easiest solution; but does it actually work?
Can you actually make any arguments to refute Naomi Klein's research apart from misogynist hate?
As to your other point: the free market purists often claim that private companies are always more efficient than government. I was providing an example to prove them wrong.
And you and many others are missing the point- people like storkhwaiting and I are not saying that there should be no free markets, just that they need to be balanced by government regulation and that privatizing certain industries is not always the best option and can actually impoverish countries. The Friedman chicago school and it's adherents are extremists who believe that everything should be privatized and deregulated and having been pushing these policies for years and now it has become a lynchpin of conservative ideology.
You bring up South Korea as an example of successful free market reform but actually it's been successful precisely because it didn't take the reform too far by privatizing all its government industries and deregulating everything else. Because the SK government retained control of its power, rail and other infrastructures, it has been able to provide these services at very reasonable prices and build up higher-quality infrastructure. Trade protectionism and government interference were key factors in allwoing such companies as Samsung, LG and Hyundai to develop into the globally-competitive companies they are today. If the SK government had thrown everything open immediately as the Chicago school would have wanted these companies would have been crushed by their foreign competitors before they had a chance to grow.
As for your last point it's become well-known that the 'regulators' on Wall street were actually doing very little regulation and were way too cosy with the compaines they were supposed to be policing.
On January 28 2010 05:12 StorkHwaiting wrote: What? I did propose a solution, albeit an aspirational one rather than a detailed economic proposal. It's the same one as Sarkozy. The philosophies of capitalism need to be reformed with a moral purpose in mind, rather than relying on puritanical Capitalist ideology.
And just to be clear: if Americans didn't think less taxes/regulation = increased economic prosperity, the Republican party would lose every single election.
This is the rhetoric that has been espoused in America for the last 30 years. This is the economic philosophy the WORLD has been operating on for the last 30 years. Don't tell me some crap like "this isn't edgy or provocative." If it wasn't provocative, then why was the entire world marching to this beat for decades? And why did it take a massive slap to the face like this last recession to make people wake up and smell the coffee?
Just because I'm posting it now doesn't mean I didn't hold the same view ten years ago. I don't give a shit about being edgy. That was just Heyoka's queer little insult he felt needed to be expressed. It's the fact that this recession was such an epic vindication of my positions (and of many other minority economic thinkers). It is a great thing to see that the world leaders are FINALLY starting to see the light. This view has been the MINORITY for a long time. And I'm amazed you think it hasn't been the minority view.
The crux of the argument still lies in people making the "right" decision. Suddenly thinking, oh, well we'll make the right decision this time, doesn't quite cut it because seldom is there a clear cut correct answer that somehow lands due north so everybody's moral compass points to it.
Republicans would lose every single election if people actually voted on what was best for them or what they believed. Voting has little to do with actual needs, but instead with what basically becomes tradition passed on down families to the younger generation. And switching parties? Please, that's admitting you've had the wrong view point for the past X number of years. People would rather ignore what is best for them just to not be on the losing side of things.
I'd have to disagree. Because the guiding philosophy for the past 30 years is that things will naturally take care of themselves. This ideal of laissez faire.
Now, they're being forced to take a step back, reevaluate, and realize that no, laissez faire and letting things take the "natural" course is not the right way. Rather, things will need to be guided and more strictly regulated to create the outcomes that are needed.
To use an Eastern example, it's the difference between Confucianism and Taoism. It is a fundamental difference between the two and it most certainly does not have the same foundation of "people making the right decision."
Taoism espouses that there is a natural "Way," and that if everything is in tune with that Way it leads to harmony for all. This is very VERY similar to the concept of laissez faire, market forces, and natural equilibrium. Sometimes I wonder if the original theorists of these concepts drew their inspiration from Lao Zi.
Confucianism, on the other hand, says that systems must be created that create the good effects we want to see, and it is in the perfection of these systems and roles of people that harmony can be found.
There is a HUGE difference between the two, to the point that the philosophies are virtually antagonistic. And this is the entire crux of the debate going on right now. Is the "free" and "natural" order of things most beneficial, or should we be focusing on creating systems that are best at guiding and creating the growth/equality that we think is morally righteous for the people.
This is what is meant by "reinventing capitalism so that these original principles are the means and not the ends." We need to reinvent these theories and implement systems so that they serve what we want as a society, rather than just letting nature take its course.
Those are interesting points you made. I've never thought about it like that before.
The question I'm left wondering is:
Doesn't the Taoist perspective you describe subsume the Confucianist perspective? For example, if confucianists decide to get together and create a harmonic socio-economic system, then wasn't that the natural (Taoist) Way of things after all?
in short: there is no law that forces you to do so, the irs is a private organisation and the money they get, goes to a private organisation too, federal reserve. yes private. In history at some point a lower court tried to enforce direct income taxes for individuals, supreme court declared that as illegal in a very short period after. thats the situation until today. supreme court rules...yay!? maybe elsewhere.
documentation by aaron russo(r.i.p.), America: Freedom to Fascism
btw this is serious stuff if you are somehow happy, simple minded and sensitiv don't watch this. but since this topic, i wonder if someone like that would care about this threat. :D
i really would like to try that out, ask an irs agent, ok i going to pay income tax, just show me the law, i just dont understand... then.. yea.. erm.. where.. wtf?!
update: things have changed a bit: http://www.secret.tv/artikel801310/Aaron_Russo_ueber_Nick_Rockefeller this is an interview after his docu before his death. you learn something about the world by his ex close fellows, but he tells you not to go offensive. wage the offensiveness the way it matters to you.
On January 30 2010 13:05 VabuDeltaKaiser wrote: Just want to add some information:
-you as a US citizen have not to pay income taxes
in short: there is no law that forces you to do so, the irs is a private organisation and the money they get, goes to a private organisation too, federal reserve. yes private. In history at some point a lower court tried to enforce direct income taxes for individuals, supreme court declared that as illegal in a very short period after. thats the situation until today. supreme court rules...yay!? maybe elsewhere.
documentation by aaron russo(r.i.p.), America: Freedom to Fascism
btw this is serious stuff if you are somehow happy, simple minded and sensitiv don't watch this. but since this topic, i wonder if someone like that would care about this threat. :D
i really would like to try that out, ask an irs agent, ok i going to pay income tax, just show me the law, i just dont understand... then.. yea.. erm.. where.. wtf?!
update: things have changed a bit: http://www.secret.tv/artikel801310/Aaron_Russo_ueber_Nick_Rockefeller this is an interview after his docu before his death. you learn something about the world by his ex close fellows, but he tells you not to go offensive. wage the offensiveness the way it matters to you.
yeah. maybe a little off-topic, or... maybe not. anyway, amen ( in the strictly atheistic sense). i'm not a neo-con, but i tend to agree. our freedoms are evaporating and our debt is out of control.
i consider myself a socially conscious person and strive for environmental responsibility. I've got no problems with lawful taxes that pay for social services, the defense of the nation, the courts, etc, in a transparent way. That said, it seems the America we live in today is but a shadow of the one created by our founders. I don't mean to glorify our slave owning founders, but they did know a thing or two about freedom.
Disagree? Well, then justify this:
torture censorship unlawful surveillance unlawful seizure of property manufactured consent,... err i mean democratic republic unlimited financial contributions to the political process by corporate "persons" the constitution is just a piece of paper
Like a famous rap group said "it's easier to sit back than stick out your neck. it's easier to break it than build it correct."
On January 30 2010 13:05 VabuDeltaKaiser wrote: Just want to add some information:
-you as a US citizen have not to pay income taxes
in short: there is no law that forces you to do so, the irs is a private organisation and the money they get, goes to a private organisation too, federal reserve. yes private. In history at some point a lower court tried to enforce direct income taxes for individuals, supreme court declared that as illegal in a very short period after. thats the situation until today. supreme court rules...yay!? maybe elsewhere..
Wait, what? The IRS is part of the US Treasury, AKA it is part of the government. And at some point in history is VERY vague... but either way it doesn't matter. The 16th amendment gives the Federal government the ability to levy income taxes. Is this right? Idk. But I know that the gov't can levy income taxes, and that the IRS is part of the government. http://en.wikipedia.org/wiki/Internal_Revenue_Service Here's the actual law: http://law.justia.com/us/cfr/title26/26-20.0.1.1.2.1.2.1.html
On January 30 2010 13:05 VabuDeltaKaiser wrote: Just want to add some information:
-you as a US citizen have not to pay income taxes
in short: there is no law that forces you to do so, the irs is a private organisation and the money they get, goes to a private organisation too, federal reserve. yes private. In history at some point a lower court tried to enforce direct income taxes for individuals, supreme court declared that as illegal in a very short period after. thats the situation until today. supreme court rules...yay!? maybe elsewhere..
Wait, what? The IRS is part of the US Treasury, AKA it is part of the government. And at some point in history is VERY vague... but either way it doesn't matter. The 16th amendment gives the Federal government the ability to levy income taxes. Is this right? Idk. But I know that the gov't can levy income taxes, and that the IRS is part of the government. http://en.wikipedia.org/wiki/Internal_Revenue_Service Here's the actual law: http://law.justia.com/us/cfr/title26/26-20.0.1.1.2.1.2.1.html
it does matter. vague isn't good enough. the people can do *whatever* they want, so long as it isn't a crime. the government can do *nothing*, except what they've been authorized to do.
On January 30 2010 13:05 VabuDeltaKaiser wrote: Just want to add some information:
-you as a US citizen have not to pay income taxes
in short: there is no law that forces you to do so, the irs is a private organisation and the money they get, goes to a private organisation too, federal reserve. yes private. In history at some point a lower court tried to enforce direct income taxes for individuals, supreme court declared that as illegal in a very short period after. thats the situation until today. supreme court rules...yay!? maybe elsewhere..
Wait, what? The IRS is part of the US Treasury, AKA it is part of the government. And at some point in history is VERY vague... but either way it doesn't matter. The 16th amendment gives the Federal government the ability to levy income taxes. Is this right? Idk. But I know that the gov't can levy income taxes, and that the IRS is part of the government. http://en.wikipedia.org/wiki/Internal_Revenue_Service Here's the actual law: http://law.justia.com/us/cfr/title26/26-20.0.1.1.2.1.2.1.html
Where does the law state that the average citizen has to pay income tax? Not in the law you provided. Read it closely:
"The Director, Foreign Operations District, administers the internal revenue laws applicable to taxpayers residing or doing business abroad, foreign taxpayers deriving income from sources within the United States, and taxpayers who are required to withhold tax on certain payments to nonresident aliens and foreign corporations, provided the books and records of those taxpayers are located outside the United States."
On January 30 2010 13:05 VabuDeltaKaiser wrote: Just want to add some information:
-you as a US citizen have not to pay income taxes
in short: there is no law that forces you to do so, the irs is a private organisation and the money they get, goes to a private organisation too, federal reserve. yes private. In history at some point a lower court tried to enforce direct income taxes for individuals, supreme court declared that as illegal in a very short period after. thats the situation until today. supreme court rules...yay!? maybe elsewhere..
Wait, what? The IRS is part of the US Treasury, AKA it is part of the government. And at some point in history is VERY vague... but either way it doesn't matter. The 16th amendment gives the Federal government the ability to levy income taxes. Is this right? Idk. But I know that the gov't can levy income taxes, and that the IRS is part of the government. http://en.wikipedia.org/wiki/Internal_Revenue_Service Here's the actual law: http://law.justia.com/us/cfr/title26/26-20.0.1.1.2.1.2.1.html
Where does the law state that the average citizen has to pay income tax? Not in the law you provided. Read it closely:
"The Director, Foreign Operations District, administers the internal revenue laws applicable to taxpayers residing or doing business abroad, foreign taxpayers deriving income from sources within the United States, and taxpayers who are required to withhold tax on certain payments to nonresident aliens and foreign corporations, provided the books and records of those taxpayers are located outside the United States."
You understand that was the procedural rules correct? as in, it was not the whole law, but simply part of it stating the INTRODUCTION upon procedural rules which I gave to show that the IRS is indeed part of the government But here, http://law.justia.com/us/cfr/title26/26-1.0.1.1.1.0.1.2.html
Section 1 of the Code imposes an income tax on the income of every individual who is a citizen or resident of the United States and, to the extent provided by section 871(b) or 877(b), on the income of a nonresident alien individual
Now, I'm not an expert on this, and I'm not sure if this is *exactly* what you meant, but idk. best I could do. If you want to find out more, well, just read through this. http://law.justia.com/us/cfr/title26.html
On January 30 2010 13:05 VabuDeltaKaiser wrote: Just want to add some information:
-you as a US citizen have not to pay income taxes
in short: there is no law that forces you to do so, the irs is a private organisation and the money they get, goes to a private organisation too, federal reserve. yes private. In history at some point a lower court tried to enforce direct income taxes for individuals, supreme court declared that as illegal in a very short period after. thats the situation until today. supreme court rules...yay!? maybe elsewhere..
Wait, what? The IRS is part of the US Treasury, AKA it is part of the government. And at some point in history is VERY vague... but either way it doesn't matter. The 16th amendment gives the Federal government the ability to levy income taxes. Is this right? Idk. But I know that the gov't can levy income taxes, and that the IRS is part of the government. http://en.wikipedia.org/wiki/Internal_Revenue_Service Here's the actual law: http://law.justia.com/us/cfr/title26/26-20.0.1.1.2.1.2.1.html
Where does the law state that the average citizen has to pay income tax? Not in the law you provided. Read it closely:
"The Director, Foreign Operations District, administers the internal revenue laws applicable to taxpayers residing or doing business abroad, foreign taxpayers deriving income from sources within the United States, and taxpayers who are required to withhold tax on certain payments to nonresident aliens and foreign corporations, provided the books and records of those taxpayers are located outside the United States."
You understand that was the procedural rules correct? as in, it was not the whole law, but simply part of it stating the INTRODUCTION upon procedural rules which I gave to show that the IRS is indeed part of the government But here, http://law.justia.com/us/cfr/title26/26-1.0.1.1.1.0.1.2.html
Section 1 of the Code imposes an income tax on the income of every individual who is a citizen or resident of the United States and, to the extent provided by section 871(b) or 877(b), on the income of a nonresident alien individual
Now, I'm not an expert on this, and I'm not sure if this is *exactly* what you meant, but idk. best I could do. If you want to find out more, well, just read through this. http://law.justia.com/us/cfr/title26.html
The "United States" referred to in the law or code that you cite is not what you and I commonly understand it to be. At least that is what I'm assuming, given our acknowledged and mutual ignorance of the facts.
This debate is getting a little over my head, so I called a friend of mine. Hopefully he'll respond to this thread and clear things up a little. It can be difficult to see with all the smoke and mirrors about.
3) If privatization and deregulation is so beneficial why was Naomi Klein (in the 'Shock Doctrine' ) able to find so many (well-researched) examples, in a variety of countries, where such programs resulted in impoverishment for the majority of the population and only benefited small business elites? Why was it necessary for many of the countries who pushed such programs to kidnap and torture trade unionists and others who opposed such measures and why were the measures often introduced in very undemocratic ways (ie in Chile after a military coup)?
I'm sorry. I was reading your questions and took them seriously until I read this. I'll engage in ad hominem here and just say that Naomi Klein is the most BS leftist w*o*e (fill in the blanks) on the face of the earth. Her backtalking Milton Friedman is one of the most disgusting things I've come across in my entire life.
To answer your questions I'll just take a shortcut and claim that free market reforms have been successfull where they have been applied. This includes Sweden, USA, India, China, Hong Kong, Japan, South Korea and so on.
I don't get how you can't see that some of your examples are just kind of... irrelevant. If a nation has a state controlled railway infrastructure and then sell it to a company, there's no guarantee whatsoever that the company will perform good.
That said, I don't think there is any one perfect system. And I really don't think there are that many people who believe in total deregulation and laissez-faire. What most people should be able to agree on is that concentration of power is bad.
Besides, the finance industry was already regulated. There were already thousands of regulators on Wall Street and yet they couldn't see it coming. So what makes you think that further regulation would do any good? It might seem the most easiest solution; but does it actually work?
Can you actually make any arguments to refute Naomi Klein's research apart from misogynist hate?
As to your other point: the free market purists often claim that private companies are always more efficient than government. I was providing an example to prove them wrong.
What examples were those again? New zealand banks and railroads, Naomi Klein, and South Korea? Can you cite some online sources so I can study their validity?
I'm not particularly interested in macro economics empiricism you see, I just wanna know what you think you know. I wouldn't personally handle supporting slavery in order to be freer, even if some awesome slavemaster somewhere managed to do a half assed job and not a complete fuckup.
3) If privatization and deregulation is so beneficial why was Naomi Klein (in the 'Shock Doctrine' ) able to find so many (well-researched) examples, in a variety of countries, where such programs resulted in impoverishment for the majority of the population and only benefited small business elites? Why was it necessary for many of the countries who pushed such programs to kidnap and torture trade unionists and others who opposed such measures and why were the measures often introduced in very undemocratic ways (ie in Chile after a military coup)?
I'm sorry. I was reading your questions and took them seriously until I read this. I'll engage in ad hominem here and just say that Naomi Klein is the most BS leftist w*o*e (fill in the blanks) on the face of the earth. Her backtalking Milton Friedman is one of the most disgusting things I've come across in my entire life.
To answer your questions I'll just take a shortcut and claim that free market reforms have been successfull where they have been applied. This includes Sweden, USA, India, China, Hong Kong, Japan, South Korea and so on.
I don't get how you can't see that some of your examples are just kind of... irrelevant. If a nation has a state controlled railway infrastructure and then sell it to a company, there's no guarantee whatsoever that the company will perform good.
That said, I don't think there is any one perfect system. And I really don't think there are that many people who believe in total deregulation and laissez-faire. What most people should be able to agree on is that concentration of power is bad.
Besides, the finance industry was already regulated. There were already thousands of regulators on Wall Street and yet they couldn't see it coming. So what makes you think that further regulation would do any good? It might seem the most easiest solution; but does it actually work?
Can you actually make any arguments to refute Naomi Klein's research apart from misogynist hate?
As to your other point: the free market purists often claim that private companies are always more efficient than government. I was providing an example to prove them wrong.
And you and many others are missing the point- people like storkhwaiting and I are not saying that there should be no free markets, just that they need to be balanced by government regulation and that privatizing certain industries is not always the best option and can actually impoverish countries. The Friedman chicago school and it's adherents are extremists who believe that everything should be privatized and deregulated and having been pushing these policies for years and now it has become a lynchpin of conservative ideology.
You bring up South Korea as an example of successful free market reform but actually it's been successful precisely because it didn't take the reform too far by privatizing all its government industries and deregulating everything else. Because the SK government retained control of its power, rail and other infrastructures, it has been able to provide these services at very reasonable prices and build up higher-quality infrastructure. Trade protectionism and government interference were key factors in allwoing such companies as Samsung, LG and Hyundai to develop into the globally-competitive companies they are today. If the SK government had thrown everything open immediately as the Chicago school would have wanted these companies would have been crushed by their foreign competitors before they had a chance to grow.
As for your last point it's become well-known that the 'regulators' on Wall street were actually doing very little regulation and were way too cosy with the compaines they were supposed to be policing.
Exactly. So obviously regulation fails. Why do you think it would work if you hire more of them?
And you misreprsent Friedman & Co. For example, they do not support privitization of the legal system. Further, I'll explain the fallacy behind this:
"As to your other point: the free market purists often claim that private companies are always more efficient than government. I was providing an example to prove them wrong."
The example you were providing was that of a government giving away a monopoly on railway infrastructure to a private company. Now, nobody would say that it's a guarantee that the private company will perform better than the government did. Private companies go bankrupt all the time because a lot of them are bad.
You're misrepresenting the claim by providing a bad example in an unatural situation. The claim is that the free market will, if left alone, in the long run lead to a more efficient solution than a government-based one. This is not the same as saying that any private company will outperform a government-based company.
Regarding South Korea; you can't say that the economic success happened because the government did not do certain things. What I can say however, is that the success as of late (~95 to 2010) has been a result of extensive free market reforms. I mean; just because a government may succeed in something, it does not logically follow that free market theory is therefore false.
Regarding Klein; I'm not a misogynist and my statement was not in the least misogynistic.
But sure; I'll give you something to think about. These are not very long videos and since you asked I hope you find the time to watch them (~8 minutes):
And please do watch and write down statements made from Naomi Klein and compare them to the actual facts. In my eyes, lying factually about, and distorting the heritage of, a dead man is disgusting.
zerojumpz i've been reading some friedman critiques on mises.org and I think they would answer some of your latest questions. http://mises.org/daily/4067 seach friedman or monetarist 4 more
I will dare try to resume what I gather from the article. The article says... aggregation sucks cockz lololol basically.
On January 30 2010 19:31 ParasitJonte wrote: Regarding Klein; I'm not a misogynist and my statement was not in the least misogynistic.
You're right. Calling somebody a whore, is not in the least misogynistic.
On January 30 2010 19:31 ParasitJonte wrote: The example you were providing was that of a government giving away a monopoly on railway infrastructure to a private company. Now, nobody would say that it's a guarantee that the private company will perform better than the government did. Private companies go bankrupt all the time because a lot of them are bad.
You're misrepresenting the claim by providing a bad example in an unatural situation. The claim is that the free market will, if left alone, in the long run lead to a more efficient solution than a government-based one. This is not the same as saying that any private company will outperform a government-based company.
This claim is entirely theoretical. In the cases where it has been tried, it's led to massive social inequality.
On January 30 2010 19:31 ParasitJonte wrote: But sure; I'll give you something to think about. These are not very long videos and since you asked I hope you find the time to watch them (~8 minutes):
The videos you linked are terrible. Terrible.
"Naomi Klein is a liar" in particular is a video that purports to hate Klein's 'smear' campaign while doing exactly the same thing itself. It quote mines for something she said about friedman, then cuts away to something different she said to the 'socialist hordes'. Omg. She's being inconsistant! That means she's a liar. Er... right. I forgot people were only allowed to repeat the same line over and over. Do anything else and they're being inconsistant liars right?
Then for the next minute or so it indisperses various lines with "You're a liar", without any providing anything contradictory.
For the Coup de grâce, it goes on to explain that "Klein equate[s] Milton Friedman with supporting violence" then shows a clip from her film talking about shock therapy, where she doesn't directly claim Friedman supported violence, but explains that it was a required aspect of the entire package.
Having made no direct refutation of any of her claims, the video confidently sums up "Naomi Klein is a liar and is shockingly ignorant".
Sad thing is, the video probably does its job, people look at it and think "Oh, good... I don't need to worry about anything she's said then".
Your linked video Johan Norberg: Naomi Klein on Milton Friedman is similarly terrible.
His arguments come down to two main points. Points which he makes, then claims are symptomatic of her entire book, that she deliberately lies and distorts. Pretty big claim don't you think? I mean, for a claim like that he'd better have some pretty hard evidence right?
If his evidence was shown to be faulty, one could easily claim that even her strongest critics have trouble finding holes in her book.
So, his two main points. First he says she quoted Friedman out of context, "real change comes after a crisis". He follows up by saying "If you look at the real quote"... then doesn't say anything about the quote at all. Whoops.
His next point is "Klein claims that Friedman supported the Iraq war, when he actually opposed it"
Friedman supported the war, then like a lot of people after it was shown to be a gigantic failure, flip flopped and was suddenly against it from the beginning.
Here is Friedman during the war:
“President Bush only wanted war because anything else would have threatened the freedom and the prosperity of the USA.”
and
“the end justifies the means. As soon as we’re rid of Saddam, the political differences will also disappear.”
"I was opposed to going into Iraq from the beginning. I think it was a mistake, for the simple reason that I do not believe the United States of America ought to be involved in aggression."
EDIT: Ooops, I forgot a point that Johan made. He sets up the strawman of "Klein claims Friedman supported IMF intervention in asia". The handily knocks it down. With "But Friedman actually opposed the IMF generally. This is what she does, she takes advantage of the fact that few people know exactly..." Nice one Johan. You're the man now.
Here's what she actually says in 'The Shock Doctrine':
“Philosophically, Milton Friedman did not believe in the IMF or the World Bank: they were classic examples of big government interfering with the delicate signals of the free market. So it was ironic that there was a virtual conveyor belt delivering Chicago Boys to the two institutions’ hulking headquarters on Nineteenth Street in Washington, D.C., where they took up many of the top positions.”
Oh. Did you just get caught out knocking down a blatant strawman and using it to claim that Klein was universally dishonest and manipulative?
You can't trust a single thing that man says. Sad, just sad.
I might add that these refutations are hardly from a impartial source, carefully weighing various points of view and with a higher alliegance to the truth.
No, these refutations come directly from the 'Cato Institute', some of the most hardline supporters of Friedman's theories. Obviously they have personal interest in protecting the reputation of Friedman. A blanket smear campaign filled with misrepresentation and strawmen dressed up as an impartial documentary should do the job nicely right?
How did you put it?
In my eyes, lying factually about, and distorting the message of, a talented reporter is disgusting.
This discussion is interesting because I don't know anything about economics; and because economists always approach political issues in such an alarming way. It's quite hard not to just get confused reading people's arguments here.
People have big problems with a strong government but, to whomever it is pertinent, can I ask you who is supposed to deal with issues of compassion and justice in a society where government is small and everything is privatised?
I mean the way I am seeing it is...if you didn't have a government collecting taxes to spend on healthcare, child protection services, welfare, policing, care working for disabled people, justice and prisons; would you instead have a bunch of private organisations that treated the populace as 'customers'?
Would you see adverts every day asking you to buy shares in child protection or disabled care? Is the only way that such endeavours could gain money by addressing the 'target market' in the same way as Apple sells its iPods? By product placing in rap videos and having witty ads with fun music?
It seems to me that, yeah, there are big problems with government collecting all the money of the country into one big pot and then spending it on what it thinks the country needs (and then the electorate deciding whether it did well or the opposition party could do it better for the next 4 years); but there are also problems with a system where everyone gets to choose exactly how much of their capital goes into all of these 'public services'.
It seems to me that you either try to have bright, educated thinking people who deal in 'country management' (government) to decide where the country's money for public services goes, and have to pay a price for that which is corruption and bloated inefficiency; or you have the common man deciding where he thinks his money should be spent and being preyed on by adverts, propaganda and a general lack of time to think about the issues in any level depth.
Also, I think one reason I have issues with the ideas of big corporations running everything is that I doubt you will be able to FOI them much. Sure, if you can expose a scandal in a private company, the offenders will lose their job because it's bad for business. And, it's always possible that whistleblowers will be purged and silenced when you are dealing with government shenanigans. But I expect that government (at least in the UK) is far more transparent than private corporations; and therefore less capable of getting away with ripoffs and scandals.
So can someone address those issues from a economist, free-market or whatever perspective?
Really unique and edgy stuff, OP. No, really. This is groundbreaking, someone call the New York Times.
Back to reality, sounds like someone just took Microeconomics 101 and decided to blog their Deep Thoughts on the matter. Seriously, this is like freshman undergraduate level material. I suggest you do a little more research into the history of the 20th century and the manner in which various political and economic systems have played out over the years. You'll realize:
*yes, the ideal free market is a myth *the notion of government as altruistic is a myth *there is no true solution to dehumanizing, modern institutions
It may be hard for some Europeans to understand, but a vast majority of the voting American populace would vehemently disagree with the OP. You can't really blame them, though, when their main/only source of information about issues is directly FROM the news media controlled by whichever party they support. Republicans get all their economic/political information from Fox News, so obviously they will always vote Republican. Democrats operate in the same fashion. Nothing major is going to change in America until something incredibly drastic happens and the constant political ping-pong game fails to correct it and everyone starts literally starving to death and America turns into a third world country. I give it about one hundred years.
On January 30 2010 23:54 LF9 wrote: It may be hard for some Europeans to understand, but a vast majority of the voting American populace would vehemently disagree with the OP. You can't really blame them, though, when their main/only source of information about issues is directly FROM the news media controlled by whichever party they support. Republicans get all their economic/political information from Fox News, so obviously they will always vote Republican. Democrats operate in the same fashion. Nothing major is going to change in America until something incredibly drastic happens and the constant political ping-pong game fails to correct it and everyone starts literally starving to death and America turns into a third world country. I give it about one hundred years.
Ah, the same old myths about Europe, so sophisticated and superior. Its a pity their heavily regulated economies got hit really hard by making bad loans to developing economies, a problem which fucked over their economies far worse than the sub prime bad loans did.
Europe is in worse shape than the US economically, and is facing a major demographic crisis, to boot.
Little tip here, they never decide to "give" executives money. Thats called a profit, once expenses are taken care of. You could use the profit for things like advertising, new stores, or paying your CEO a 20 million dollar bonus, whateva.
Overall I agree capitalism's "competition = perfection" is bullshit.
On January 31 2010 01:12 Romantic wrote: Little tip here, they never decide to "give" executives money. Thats called a profit, once expenses are taken care of. You could use the profit for things like advertising, new stores, or paying your CEO a 20 million dollar bonus, whateva.
Overall I agree capitalism's "competition = perfection" is bullshit.
uh... that's not called a profit at all for tax purposes. paying your workers is called a business expense. its a way to avoid paying corporate tax. and yes, they do decide how much to pay their execs. the board does so every year
"You're right. Calling somebody a whore, is not in the least misogynistic."
No, it's not. Read the definition... Would you also portray me as misandrist if I call George Bush a whore?
""Naomi Klein is a liar" in particular is a video that purports to hate Klein's 'smear' campaign while doing exactly the same thing itself."
Yes, I don't like videos like that either but it makes the simple point that she is a liar. Why? Not because her statements are in conflict, but because that video has been thoroughly prepared and reviewed before going into production. And Friedman never said the military should be privitized.
"Here is Friedman during the war ..."
Notice that it doesn't say anywhere that he actually supports the war. Read the questions and the answers.
"So, his two main points. First he says she quoted Friedman out of context, "real change comes after a crisis". He follows up by saying "If you look at the real quote"... then doesn't say anything about the quote at all. Whoops."
Well, I own the book so I know the quote; not memorized though. Anyways, the way Klein presents it in her video and at her speeches is disingenuous to say the least. You can probably find the real quote on amazon by previewing the book if you're interested.
"In my eyes, lying factually about, and distorting the message of, a talented reporter is disgusting."
She is not a talented reporter. She is an anti-capitalist lying piece of scum. That aside, it just so happens that you can find ALL her smeartalking and distortions in her book and on youtube. She doesn't even try to hide it.
Would you please explain why she talks about Milton Friedman while showing those kinds of pictures and then continuing with that narrator thingy taken from some CIA book perhaps? She paints a very false picture and she is not an honest person.
If you truly believe that Johan Norberg is the one that cannot be trusted here then you will have to find yourself on the far left edge of society with very few supporters. That doesn't mean that you are wrong of course; but I'm trying to put things in context here a bit.
Her underlying claim throughout the entire book is that free market libertarians somehow need or support military dictatorships. It's a work of fiction; and not a very good one.
On January 30 2010 23:46 FieryBalrog wrote: Really unique and edgy stuff, OP. No, really. This is groundbreaking, someone call the New York Times.
Back to reality, sounds like someone just took Microeconomics 101 and decided to blog their Deep Thoughts on the matter. Seriously, this is like freshman undergraduate level material. I suggest you do a little more research into the history of the 20th century and the manner in which various political and economic systems have played out over the years. You'll realize:
*yes, the ideal free market is a myth *the notion of government as altruistic is a myth *there is no true solution to dehumanizing, modern institutions
OK, Gandalf. Some really unique and edgy stuff here.
On January 30 2010 23:29 sc4k wrote: It seems to me that you either try to have bright, educated thinking people who deal in 'country management' (government) to decide where the country's money for public services goes, and have to pay a price for that which is corruption and bloated inefficiency; or you have the common man deciding where he thinks his money should be spent and being preyed on by adverts, propaganda and a general lack of time to think about the issues in any level depth.
Also, I think one reason I have issues with the ideas of big corporations running everything is that I doubt you will be able to FOI them much. Sure, if you can expose a scandal in a private company, the offenders will lose their job because it's bad for business. And, it's always possible that whistleblowers will be purged and silenced when you are dealing with government shenanigans. But I expect that government (at least in the UK) is far more transparent than private corporations; and therefore less capable of getting away with ripoffs and scandals.
So can someone address those issues from a economist, free-market or whatever perspective?
Yes. In a free market, you expect people to be the least informed on each issue so they can at least select a company that does the service for them. I.e., you want a new plasma TV, you go to radioshack or someplace. Consumer -> Entrepreneur. The entrepreneur acts on decentralized price controls that are subject to everyones evaluations on products and services available in the market. His incentive is to provide something better than others in the market can, more efficiently, etc.
In a perfect democracy, really really perfect, discounting corruption and delay constraints due to sporadic election times, that same relation is only but attenuated into Voter -> Bureaucrat. The bureaucrat however acts not on precise price controls (well, he does when he takes a bribe, but discounting that) but on the amount of voters that tell him to do something. His only measure of success is the voting that happens, and whether he'll be reelected or not. This alone provides a bad measure of how much work he should put into something, whether hes doing it right or wrong, whether hes oppressing a minority or sucking off the majority by ways of compromise or whatever. Anyway, you know or at least suspect yourself why government has a ton of reasons to be inefficient already.
Now, whether thats necessary? Necessary for what? For whom? It ain't for me, I sure know that much. You think it's necessary to force everyone to be a member of your little gangster club and have their money "collected for their own good" every day? It's bullshit. People know what's best for them, there's no excuse to say that you nor anyone else can know what's best for them rather than themselves. The state is not here for your own good. They're here to leech off of you and grow as much as they can, until a time when people are too fed up and a revolution is due again.
And if you think governments protect you from corporations, you're dead wrong. The state can't even protect you from box-cutter terrorists. If you wonder why the EVUL CORPORATIONS haven't got massive armies and started walking down the street like they're the local gang, it's because violence is not cost-beneficial in the long run, it can only destroy and bring scarcity. If evil corporate men were to do it out of their own pocket, they would lose more than they would gain. How do I know that? Because they're greedy, correct? They would do anything for money, correct? Therefore, if they're not doing something right now, it's because it gives them no flow.
Guess how can they bring about war and destruction more cheaply however? Thats right, through state corruption. What's cheaper, raising your own billion-dollar army to bomb some middle easterns, or lobby a couple million so the state does it with tax-payer money? Hell, for a couple million and the right pretext, you can get a billion dollar bailout easy. Competition bitting your ass? just pass some regulation, raise the barriers of entry, put the small guys out of business and raise your prices easily. Label it "anti-trust laws" or "healthcare reform" for the luls.
"Oh thats just bad government, if we get the right people in..." You're not going to get the right people in, ever. The state is a scum institution. It is flame to moths. Sociopaths and thieves of all kinds love the legitimized power they have. The ones who buy them out may be evil, but they're utilizing the cash that's there to be used, because the peons think it's been stolen from them for their own good. Because it's necessary. Yeah it certainly is necessary, necessary for the scum to have a good time maybe.
I haven't had time to read all the replies but I hope somebody with some training in economics has come out to correct the misguided OP. If not, I could point out the major flaws and suggest some simple undergraduate textbooks.
Not to sound condescending but it has always struck me as a bit presumptuous that people with no formal education in economics will debate the subject with vocal conviction. After all, I do not argue with doctors on their prescriptions or debate with engineers how best to build their bridges or correct accountants or lawyers in their job. Yet it seems that every man on the street will happily lecture me about economics.
On January 31 2010 01:22 ParasitJonte wrote: "You're right. Calling somebody a whore, is not in the least misogynistic."
No, it's not. Read the definition... Would you also portray me as misandrist if I call George Bush a whore?
""Naomi Klein is a liar" in particular is a video that purports to hate Klein's 'smear' campaign while doing exactly the same thing itself."
Yes, I don't like videos like that either but it makes the simple point that she is a liar. Why? Not because her statements are in conflict, but because that video has been thoroughly prepared and reviewed before going into production. And Friedman never said the military should be privitized.
"Here is Friedman during the war ..."
Notice that it doesn't say anywhere that he actually supports the war. Read the questions and the answers.
"So, his two main points. First he says she quoted Friedman out of context, "real change comes after a crisis". He follows up by saying "If you look at the real quote"... then doesn't say anything about the quote at all. Whoops."
Well, I own the book so I know the quote; not memorized though. Anyways, the way Klein presents it in her video and at her speeches is disingenuous to say the least. You can probably find the real quote on amazon by previewing the book if you're interested.
"In my eyes, lying factually about, and distorting the message of, a talented reporter is disgusting."
She is not a talented reporter. She is an anti-capitalist lying piece of scum. That aside, it just so happens that you can find ALL her smeartalking and distortions in her book and on youtube. She doesn't even try to hide it.
Would you please explain why she talks about Milton Friedman while showing those kinds of pictures and then continuing with that narrator thingy taken from some CIA book perhaps? She paints a very false picture and she is not an honest person.
If you truly believe that Johan Norberg is the one that cannot be trusted here then you will have to find yourself on the far left edge of society with very few supporters. That doesn't mean that you are wrong of course; but I'm trying to put things in context here a bit.
Her underlying claim throughout the entire book is that free market libertarians somehow need or support military dictatorships. It's a work of fiction; and not a very good one.
I really can't believe you're still trying to defend your "Naomi Klein is a whore" statement.
You presented the videos as a king hit by a apparently well respected analyist. I showed them to be full of crap and the best you can come up with in response is a bit of vague handwaving about how you have the actual quote and how Friedman doesn't specifically say "I support the war in Iraq".
Then you launch back into your hatred and unsubstantiated personal opinions. Good one.
Still, though.. With globalisation we should be seeing some increased living-standards for Chinese workers, right? Theoretically, that eliminates your problem at some point in time, thanks to technological advancement, right? I don't know, I'm just 16, don't eat me!
On January 31 2010 01:32 theSAiNT wrote:Not to sound condescending but it has always struck me as a bit presumptuous that people with no formal education in economics will debate the subject with vocal conviction. After all, I do not argue with doctors on their prescriptions or debate with engineers how best to build their bridges or correct accountants or lawyers in their job. Yet it seems that every man on the street will happily lecture me about economics.
I do that all the time! Stupid doctors... with their... pills, who the fuck do they think they are? Lol.
On January 31 2010 01:49 Lovin wrote: Still, though.. With globalisation we should be seeing some increased living-standards for Chinese workers, right? Theoretically, that eliminates your problem at some point in time, thanks to technological advancement, right? I don't know, I'm just 16, don't eat me!
And they are advancing, I don't think no one denies that. But a statist would say "it's thanks to the superb chinese government, keeping a check on those greedy capitalists!" while a free marketeer would say "...it's despite the authoritarian government with their enslaving regulations..."
There's also moderates who say "too much beating bad, no beating also bad, some beating good" lololol
The OP is just completely one sided. Leaving all the good out and just talking about everything that's bad about globalization and capitalism. Sure, a lot of what he says is right. Capitalism is most likely the best we've got.
On January 31 2010 02:05 Djzapz wrote: The OP is just completely one sided. Leaving all the good out and just talking about everything that's bad about globalization and capitalism. Sure, a lot of what he says is right. Capitalism is most likely the best we've got.
I have to disagree. Most of what he says is wrong. He's using 'capitalism' and 'globalization' as buzzwords but he doesn't really understand how they work.
On January 31 2010 02:05 Djzapz wrote: The OP is just completely one sided. Leaving all the good out and just talking about everything that's bad about globalization and capitalism. Sure, a lot of what he says is right. Capitalism is most likely the best we've got.
I have to disagree. Most of what he says is wrong. He's using 'capitalism' and 'globalization' as buzzwords but he doesn't really understand how they work.
lol more like you don't understand how OPs work. Try to refrain from making assumptions about what other people know and don't know, please.
On January 31 2010 02:05 Djzapz wrote: The OP is just completely one sided. Leaving all the good out and just talking about everything that's bad about globalization and capitalism. Sure, a lot of what he says is right. Capitalism is most likely the best we've got.
lol more like you don't understand how OPs work. Try to refrain from making assumptions about what other people know and don't know, please.
Does anyone honestly think it is a good thing to compete with sweatshop workers in terms of pay/productivity?
If you think international trade is a question of 'competing with sweatshop workers' then you don't understand how it works. Sorry. In the same way that if someone tells me the sun orbits the earth, I can conclude they don't understand how it works. I'm not making assumptions.
International trade is one of those rare things, a win win situation. It's a net gain for both parties. Yes, there are situations where the trade can be detrimental but they are rare and the reasons behind the failure are more complicated then the ones you suggest. In the vast majority of cases, free trade is good.
Does anyone honestly think it is a good thing to compete with sweatshop workers in terms of pay/productivity?
If you think international trade is a question of 'competing with sweatshop workers' then you don't understand how it works. Sorry. In the same way that if someone tells me the sun orbits the earth, I can conclude they don't understand how it works. I'm not making assumptions.
International trade is one of those rare things, a win win situation. It's a net gain for both parties. Yes, there are situations where the trade can be detrimental but they are rare and the reasons behind the failure are more complicated then the ones you suggest. In the vast majority of cases, free trade is good.
No. But way to frame your opinion as if it's scientific fact.
Instead of writing 2000 words in the OP you could have just linked a couple of books or articles on neoliberalism. It's a very well known subject by anyone interested in economics. I don't know why you would present the OP as something new or something people aren't familiar with.
On January 31 2010 03:40 Scooge wrote: Instead of writing 2000 words in the OP you could have just linked a couple of books or articles on neoliberalism. It's a very well known subject by anyone interested in economics. I don't know why you would present the OP as something new or something people aren't familiar with.
You know full and well next to no one from TL would read that.
On January 31 2010 03:40 Scooge wrote: Instead of writing 2000 words in the OP you could have just linked a couple of books or articles on neoliberalism. It's a very well known subject by anyone interested in economics. I don't know why you would present the OP as something new or something people aren't familiar with.
You know full and well next to no one from TL would read that.
Frankly I skimmed the OP (and I don't think I'm alone in that) so I doubt a lot of people read the badly written, condescending alternative.
On January 31 2010 03:40 Scooge wrote: Instead of writing 2000 words in the OP you could have just linked a couple of books or articles on neoliberalism. It's a very well known subject by anyone interested in economics. I don't know why you would present the OP as something new or something people aren't familiar with.
You know full and well next to no one from TL would read that.
Frankly I skimmed the OP (and I doubt I'm alone in that) so it's not like a lot of people read the badly written, condescending alternative.
You argument is "I didn't read it... ergo its not like many people did"
I thought the OP was overly symplistic and in some places just plain wrong, but it served as a useful starting point nonetheless.
Does anyone honestly think it is a good thing to compete with sweatshop workers in terms of pay/productivity?
If you think international trade is a question of 'competing with sweatshop workers' then you don't understand how it works. Sorry. In the same way that if someone tells me the sun orbits the earth, I can conclude they don't understand how it works. I'm not making assumptions.
International trade is one of those rare things, a win win situation. It's a net gain for both parties. Yes, there are situations where the trade can be detrimental but they are rare and the reasons behind the failure are more complicated then the ones you suggest. In the vast majority of cases, free trade is good.
Free trade is always good for the consumer. There are several models which help represent the overall gains and losses from trade. In a large price setting country like the USA there should almost always be a tariff on any imported goods. There is a net gain, despite a consumer loss, because of increased domestic production (and possibly an increase in efficiency due to economies of scale) and the tariff fee.
Some of Paul Samuelson's work, particularly the Heckscher–Ohlin model, can be used to calculate optimum tariffs. Of course as a Canadian (a small, price taking country) the last thing I want is a protectionist United States, but there is plenty of economic evidence supporting protectionist theory and opposing completely free trade.
On January 31 2010 03:40 Scooge wrote: Instead of writing 2000 words in the OP you could have just linked a couple of books or articles on neoliberalism. It's a very well known subject by anyone interested in economics. I don't know why you would present the OP as something new or something people aren't familiar with.
You know full and well next to no one from TL would read that.
Frankly I skimmed the OP (and I doubt I'm alone in that) so it's not like a lot of people read the badly written, condescending alternative.
You argument is "I didn't read it... ergo its not like many people did"
I thought the OP was overly symplistic and in some places just plain wrong, but it served as a useful starting point nonetheless.
It was worded badly, but yeah.
I said he should link articles or books (that are better written, more informative and accurate) rather than write his huge post. Someone replied no one would read the articles, and I replied I doubt anyone read the huge OP to begin with.
The only difference between the two approaches would be the OP wouldn't have that feel-good feeling of being superior to people he talks down to.
On January 31 2010 03:40 Scooge wrote: Instead of writing 2000 words in the OP you could have just linked a couple of books or articles on neoliberalism. It's a very well known subject by anyone interested in economics. I don't know why you would present the OP as something new or something people aren't familiar with.
You know full and well next to no one from TL would read that.
Frankly I skimmed the OP (and I doubt I'm alone in that) so it's not like a lot of people read the badly written, condescending alternative.
You argument is "I didn't read it... ergo its not like many people did"
I thought the OP was overly symplistic and in some places just plain wrong, but it served as a useful starting point nonetheless.
It was worded badly, but yeah.
I said he should link articles or books (that are better written, more informative and accurate) rather than write his huge post. Someone replied no one would read the articles, and I replied I doubt anyone read the huge OP to begin with.
The only difference between the two approaches would be the OP wouldn't have that feel-good feeling of being superior to people he talks down to.
Yeah, you have a brilliant point. 19 pages in you think nobody read the OP.
And the only thing you've contributed this entire time is saying discussion threads should just have links to books on the topic. GJ dude. Excellent contribution.
3) If privatization and deregulation is so beneficial why was Naomi Klein (in the 'Shock Doctrine' ) able to find so many (well-researched) examples, in a variety of countries, where such programs resulted in impoverishment for the majority of the population and only benefited small business elites? Why was it necessary for many of the countries who pushed such programs to kidnap and torture trade unionists and others who opposed such measures and why were the measures often introduced in very undemocratic ways (ie in Chile after a military coup)?
I'm sorry. I was reading your questions and took them seriously until I read this. I'll engage in ad hominem here and just say that Naomi Klein is the most BS leftist w*o*e (fill in the blanks) on the face of the earth. Her backtalking Milton Friedman is one of the most disgusting things I've come across in my entire life.
To answer your questions I'll just take a shortcut and claim that free market reforms have been successfull where they have been applied. This includes Sweden, USA, India, China, Hong Kong, Japan, South Korea and so on.
I don't get how you can't see that some of your examples are just kind of... irrelevant. If a nation has a state controlled railway infrastructure and then sell it to a company, there's no guarantee whatsoever that the company will perform good.
That said, I don't think there is any one perfect system. And I really don't think there are that many people who believe in total deregulation and laissez-faire. What most people should be able to agree on is that concentration of power is bad.
Besides, the finance industry was already regulated. There were already thousands of regulators on Wall Street and yet they couldn't see it coming. So what makes you think that further regulation would do any good? It might seem the most easiest solution; but does it actually work?
Can you actually make any arguments to refute Naomi Klein's research apart from misogynist hate?
As to your other point: the free market purists often claim that private companies are always more efficient than government. I was providing an example to prove them wrong.
And you and many others are missing the point- people like storkhwaiting and I are not saying that there should be no free markets, just that they need to be balanced by government regulation and that privatizing certain industries is not always the best option and can actually impoverish countries. The Friedman chicago school and it's adherents are extremists who believe that everything should be privatized and deregulated and having been pushing these policies for years and now it has become a lynchpin of conservative ideology.
You bring up South Korea as an example of successful free market reform but actually it's been successful precisely because it didn't take the reform too far by privatizing all its government industries and deregulating everything else. Because the SK government retained control of its power, rail and other infrastructures, it has been able to provide these services at very reasonable prices and build up higher-quality infrastructure. Trade protectionism and government interference were key factors in allwoing such companies as Samsung, LG and Hyundai to develop into the globally-competitive companies they are today. If the SK government had thrown everything open immediately as the Chicago school would have wanted these companies would have been crushed by their foreign competitors before they had a chance to grow.
As for your last point it's become well-known that the 'regulators' on Wall street were actually doing very little regulation and were way too cosy with the compaines they were supposed to be policing.
Exactly. So obviously regulation fails. Why do you think it would work if you hire more of them?
And you misreprsent Friedman & Co. For example, they do not support privitization of the legal system. Further, I'll explain the fallacy behind this:
"As to your other point: the free market purists often claim that private companies are always more efficient than government. I was providing an example to prove them wrong."
The example you were providing was that of a government giving away a monopoly on railway infrastructure to a private company. Now, nobody would say that it's a guarantee that the private company will perform better than the government did. Private companies go bankrupt all the time because a lot of them are bad.
You're misrepresenting the claim by providing a bad example in an unatural situation. The claim is that the free market will, if left alone, in the long run lead to a more efficient solution than a government-based one. This is not the same as saying that any private company will outperform a government-based company.
Regarding South Korea; you can't say that the economic success happened because the government did not do certain things. What I can say however, is that the success as of late (~95 to 2010) has been a result of extensive free market reforms. I mean; just because a government may succeed in something, it does not logically follow that free market theory is therefore false.
Regarding Klein; I'm not a misogynist and my statement was not in the least misogynistic.
But sure; I'll give you something to think about. These are not very long videos and since you asked I hope you find the time to watch them (~8 minutes):
And please do watch and write down statements made from Naomi Klein and compare them to the actual facts. In my eyes, lying factually about, and distorting the heritage of, a dead man is disgusting.
*The regulation of the US financial system failed not because regulation is bad per se but because many of the regulators were far too chummy with the banks involved and the laws had been weakened by successive governments (including the repeal of Glass-Seagall).
*Friedman & co. believe in privatizing almost everything, including core functions of government such as schools, hospitals, power infrastructure, transport infrastructure, prisons etc.
* I agree that selling off a government infrastructure monopoly to a private company is a bad idea, but that's exactly the kind of practice that Friedman & co. constantly advocate! No matter how often it ends up impoverishing countries and how much the private companies abuse the government monopolies they buy up, the Chicago school keeps try to push for their privatization. I'm afraid you seem to be arguing against your same team here.
* Why can't I say that South Korea's economic success hinged on the fact that they didn't completely deregulate and privatize their economy? It's commonly accepted that the success of such companies as Samsung and LG's hinged on the protection the SK government provided.
Again you're missing the point and building straw men. I'm not arguing that countries should never open up their economies in order to grow, I'm saying that a certain amount of government regulation and not privatizing certain industries is necessary to prevent complete exploitation by private companies like the debacle that happened in Iraq. After the occupation the US government gave private companies huge, lucrative contracts to carry out rebuilding with no regulation. Many of these companies did substandard work or simply sub-contracted it out to other firms leaving hospitals and schools i a shoddy and unfinished state. This was pure Friedman-esque capitalism in action (Rumsfeld, Bremer and other Neocons were Friedman acolytes) and it was an abject failure.
*That interview is a fluff piece, a neolib throwing a few softball questions to another neolib doesn't prove much. The Shock Doctrine is full of statistics and quotes that have actually been researched and this Friedman disciple never tries to tackle any of the substance of the book.
Here's a reply from Klein to some of the Cato Institute's attacks:
Despite his later protestations, Milton Friedman openly supported the war when it was being waged. In April 2003, Friedman told the German magazine Focus that “President Bush only wanted war because anything else would have threatened the freedom and the prosperity of the USA.” Asked about increased tensions between the U.S. and Europe, Friedman replied: “the end justifies the means. As soon as we’re rid of Saddam, the political differences will also disappear.” Clearly this was not the voice of anti-intervention. Even in July 2006, when Friedman claimed to have opposed the war from the beginning, he remained hawkish. Now that the U.S. was in Iraq, Friedman told The Wall Street Journal, “it seems to me very important that we make a success of it.”
All of this has nothing to do with my book, however. In The Shock Doctrine, I describe the invasion and occupation of Iraq as the culmination of Friedman’s ideological crusade because he was America’s leading intellectual favoring the privatization of the state – not because he personally supported the war, which is irrelevant. For more than five years Iraq has been the vanguard of this radical privatization project. Private contractors now outnumber U.S. soldiers and corporations have taken on such core state functions as prisoner interrogation.
3) If privatization and deregulation is so beneficial why was Naomi Klein (in the 'Shock Doctrine' ) able to find so many (well-researched) examples, in a variety of countries, where such programs resulted in impoverishment for the majority of the population and only benefited small business elites? Why was it necessary for many of the countries who pushed such programs to kidnap and torture trade unionists and others who opposed such measures and why were the measures often introduced in very undemocratic ways (ie in Chile after a military coup)?
I'm sorry. I was reading your questions and took them seriously until I read this. I'll engage in ad hominem here and just say that Naomi Klein is the most BS leftist w*o*e (fill in the blanks) on the face of the earth. Her backtalking Milton Friedman is one of the most disgusting things I've come across in my entire life.
To answer your questions I'll just take a shortcut and claim that free market reforms have been successfull where they have been applied. This includes Sweden, USA, India, China, Hong Kong, Japan, South Korea and so on.
I don't get how you can't see that some of your examples are just kind of... irrelevant. If a nation has a state controlled railway infrastructure and then sell it to a company, there's no guarantee whatsoever that the company will perform good.
That said, I don't think there is any one perfect system. And I really don't think there are that many people who believe in total deregulation and laissez-faire. What most people should be able to agree on is that concentration of power is bad.
Besides, the finance industry was already regulated. There were already thousands of regulators on Wall Street and yet they couldn't see it coming. So what makes you think that further regulation would do any good? It might seem the most easiest solution; but does it actually work?
Can you actually make any arguments to refute Naomi Klein's research apart from misogynist hate?
As to your other point: the free market purists often claim that private companies are always more efficient than government. I was providing an example to prove them wrong.
And you and many others are missing the point- people like storkhwaiting and I are not saying that there should be no free markets, just that they need to be balanced by government regulation and that privatizing certain industries is not always the best option and can actually impoverish countries. The Friedman chicago school and it's adherents are extremists who believe that everything should be privatized and deregulated and having been pushing these policies for years and now it has become a lynchpin of conservative ideology.
You bring up South Korea as an example of successful free market reform but actually it's been successful precisely because it didn't take the reform too far by privatizing all its government industries and deregulating everything else. Because the SK government retained control of its power, rail and other infrastructures, it has been able to provide these services at very reasonable prices and build up higher-quality infrastructure. Trade protectionism and government interference were key factors in allwoing such companies as Samsung, LG and Hyundai to develop into the globally-competitive companies they are today. If the SK government had thrown everything open immediately as the Chicago school would have wanted these companies would have been crushed by their foreign competitors before they had a chance to grow.
As for your last point it's become well-known that the 'regulators' on Wall street were actually doing very little regulation and were way too cosy with the compaines they were supposed to be policing.
Exactly. So obviously regulation fails. Why do you think it would work if you hire more of them?
And you misreprsent Friedman & Co. For example, they do not support privitization of the legal system. Further, I'll explain the fallacy behind this:
"As to your other point: the free market purists often claim that private companies are always more efficient than government. I was providing an example to prove them wrong."
The example you were providing was that of a government giving away a monopoly on railway infrastructure to a private company. Now, nobody would say that it's a guarantee that the private company will perform better than the government did. Private companies go bankrupt all the time because a lot of them are bad.
You're misrepresenting the claim by providing a bad example in an unatural situation. The claim is that the free market will, if left alone, in the long run lead to a more efficient solution than a government-based one. This is not the same as saying that any private company will outperform a government-based company.
Regarding South Korea; you can't say that the economic success happened because the government did not do certain things. What I can say however, is that the success as of late (~95 to 2010) has been a result of extensive free market reforms. I mean; just because a government may succeed in something, it does not logically follow that free market theory is therefore false.
Regarding Klein; I'm not a misogynist and my statement was not in the least misogynistic.
But sure; I'll give you something to think about. These are not very long videos and since you asked I hope you find the time to watch them (~8 minutes):
And please do watch and write down statements made from Naomi Klein and compare them to the actual facts. In my eyes, lying factually about, and distorting the heritage of, a dead man is disgusting.
*The regulation of the US financial system failed not because regulation is bad per se but because many of the regulators were far too chummy with the banks involved and the laws had been weakened by successive governments (including the repeal of Glass-Seagall).
*Friedman & co. believe in privatizing almost everything, including core functions of government such as schools, hospitals, power infrastructure, transport infrastructure, prisons etc.
* I agree that selling off a government infrastructure monopoly to a private company is a bad idea, but that's exactly the kind of practice that Friedman & co. constantly advocate! No matter how often it ends up impoverishing countries and how much the private companies abuse the government monopolies they buy up, the Chicago school keeps try to push for their privatization. I'm afraid you seem to be arguing against your same team here.
* Why can't I say that South Korea's economic success hinged on the fact that they didn't completely deregulate and privatize their economy? It's commonly accepted that the success of such companies as Samsung and LG's hinged on the protection the SK government provided.
Again you're missing the point and building straw men. I'm not arguing that countries should never open up their economies in order to grow, I'm saying that a certain amount of government regulation and not privatizing certain industries is necessary to prevent complete exploitation by private companies like the debacle that happened in Iraq. After the occupation the US government gave private companies huge, lucrative contracts to carry out rebuilding with no regulation. Many of these companies did substandard work or simply sub-contracted it out to other firms leaving hospitals and schools i a shoddy and unfinished state. This was pure Friedman-esque capitalism in action (Rumsfeld, Bremer and other Neocons were Friedman acolytes) and it was an abject failure.
*That interview is a fluff piece, a neolib throwing a few softball questions to another neolib doesn't prove much. The Shock Doctrine is full of statistics and quotes that have actually been researched and this Friedman disciple never tries to tackle any of the substance of the book.
Here's a reply from Klein to some of the Cato Institute's attacks:
Despite his later protestations, Milton Friedman openly supported the war when it was being waged. In April 2003, Friedman told the German magazine Focus that “President Bush only wanted war because anything else would have threatened the freedom and the prosperity of the USA.” Asked about increased tensions between the U.S. and Europe, Friedman replied: “the end justifies the means. As soon as we’re rid of Saddam, the political differences will also disappear.” Clearly this was not the voice of anti-intervention. Even in July 2006, when Friedman claimed to have opposed the war from the beginning, he remained hawkish. Now that the U.S. was in Iraq, Friedman told The Wall Street Journal, “it seems to me very important that we make a success of it.”
All of this has nothing to do with my book, however. In The Shock Doctrine, I describe the invasion and occupation of Iraq as the culmination of Friedman’s ideological crusade because he was America’s leading intellectual favoring the privatization of the state – not because he personally supported the war, which is irrelevant. For more than five years Iraq has been the vanguard of this radical privatization project. Private contractors now outnumber U.S. soldiers and corporations have taken on such core state functions as prisoner interrogation.
I promised myself I wouldn't go back to this thread, but this overwhelmingly naive PoV has this response that, as of today, still has not been responded to.
On January 31 2010 01:32 theSAiNT wrote: I haven't had time to read all the replies but I hope somebody with some training in economics has come out to correct the misguided OP. If not, I could point out the major flaws and suggest some simple undergraduate textbooks.
Not to sound condescending but it has always struck me as a bit presumptuous that people with no formal education in economics will debate the subject with vocal conviction. After all, I do not argue with doctors on their prescriptions or debate with engineers how best to build their bridges or correct accountants or lawyers in their job. Yet it seems that every man on the street will happily lecture me about economics.
Economics is a very, very soft science. It's certainly nothing like engineering or biology, and it's quite disingenuous of you to infer otherwise. Any moderately well-read person is capable of understanding the subject well enough to discuss the real world implications of economic policy. Perhaps instead of lecturing people on their perceived faults, you could be adding something to the conversation?
On January 30 2010 23:29 sc4k wrote: It seems to me that you either try to have bright, educated thinking people who deal in 'country management' (government) to decide where the country's money for public services goes, and have to pay a price for that which is corruption and bloated inefficiency; or you have the common man deciding where he thinks his money should be spent and being preyed on by adverts, propaganda and a general lack of time to think about the issues in any level depth.
Also, I think one reason I have issues with the ideas of big corporations running everything is that I doubt you will be able to FOI them much. Sure, if you can expose a scandal in a private company, the offenders will lose their job because it's bad for business. And, it's always possible that whistleblowers will be purged and silenced when you are dealing with government shenanigans. But I expect that government (at least in the UK) is far more transparent than private corporations; and therefore less capable of getting away with ripoffs and scandals.
So can someone address those issues from a economist, free-market or whatever perspective?
Yes. In a free market, you expect people to be the least informed on each issue so they can at least select a company that does the service for them. I.e., you want a new plasma TV, you go to radioshack or someplace. Consumer -> Entrepreneur. The entrepreneur acts on decentralized price controls that are subject to everyones evaluations on products and services available in the market. His incentive is to provide something better than others in the market can, more efficiently, etc.
The key problem here is 'be(ing) the least informed'. Without a high standard of learning, a human being is in no way capable of being a rational actor in today's world. This becomes a problem as free market policy actively works against equality as actors in the system in the first place. With privatization of schooling, the divide between privileged and disadvantaged will continue to grow. Then follows the divide between rich and poor. You can see where I'm going with this. If everyone is not given an equal opportunity to succeed, the system is broken from the start.
"Oh thats just bad government, if we get the right people in..." You're not going to get the right people in, ever. The state is a scum institution. It is flame to moths. Sociopaths and thieves of all kinds love the legitimized power they have. The ones who buy them out may be evil, but they're utilizing the cash that's there to be used, because the peons think it's been stolen from them for their own good. Because it's necessary. Yeah it certainly is necessary, necessary for the scum to have a good time maybe.
What makes those people bad, or evil? I assume you would argue they are just that way to begin with, and that is where the true political divide is. A socialist will argue that, in time, the nature of humans can improve, because the majority of the problems in the world are a result of our own carelessness and lack of perspective. People are not good or bad, they become one or the other as a result of their experiences, modified only to a minor degree by genetics. For someone with an open upbringing and ample knowledge of life and the world as a whole, there is little reason to wish to impact anyone else negatively. On the other end of the spectrum, authoritarian treatment and superstition generally lead to perpetuation of the fucked-up, violent, and xenophobic status quo.
It's a bit late for me, so I'll expand more on this if it's not making complete sense. Hopefully, I'll also have some time to respond to a very coherent post a few pages back by Zato-1 that has gone without notice.
If you think international trade is a question of 'competing with sweatshop workers' then you don't understand how it works. Sorry. In the same way that if someone tells me the sun orbits the earth, I can conclude they don't understand how it works. I'm not making assumptions.
International trade is one of those rare things, a win win situation. It's a net gain for both parties. Yes, there are situations where the trade can be detrimental but they are rare and the reasons behind the failure are more complicated then the ones you suggest. In the vast majority of cases, free trade is good.
No. But way to frame your opinion as if it's scientific fact.
What is scientific fact? If you define it as 'a consistent theoretical model supported by a large body of empirical evidence' then yes, my 'opinion' is quite close.
People have been thinking about international trade for a very long time. The literature is vast and the theoretical basis for it is well understood by economists. The most basic idea underpinning it all, the theory of comparative advantage, goes back to Ricardo in 1817, and some might argue, even further.
Your OP shows a complete failure to grasp this most crucial concept.
On January 31 2010 04:04 GreenManalishi wrote:
Free trade is always good for the consumer. There are several models which help represent the overall gains and losses from trade. In a large price setting country like the USA there should almost always be a tariff on any imported goods. There is a net gain, despite a consumer loss, because of increased domestic production (and possibly an increase in efficiency due to economies of scale) and the tariff fee.
Some of Paul Samuelson's work, particularly the Heckscher–Ohlin model, can be used to calculate optimum tariffs. Of course as a Canadian (a small, price taking country) the last thing I want is a protectionist United States, but there is plenty of economic evidence supporting protectionist theory and opposing completely free trade.
You're absolutely right. Optimal tariffs are actually a relevant theoretical argument for considering barriers to trade and are a subject of considerable debate. I've always agreed more with authors like Krugman and Obstfeld who would argue that they would have a relatively small effect. However, I think there's a recent 2006 paper by Broda and others that looks more closely at the empirical effect.
Having said all that, policy debates on tariffs are never presented as being driven by optimal tariffs. That mechanism is the exploitation of market power by domestic producers and 'monopoly' is a dirty word to policy makers and people like the OP. Invariably, the arguments are in the vein of 'we need to protect jobs against sweat shops' which are alarmist and wrong.
On January 30 2010 23:29 sc4k wrote: It seems to me that you either try to have bright, educated thinking people who deal in 'country management' (government) to decide where the country's money for public services goes, and have to pay a price for that which is corruption and bloated inefficiency; or you have the common man deciding where he thinks his money should be spent and being preyed on by adverts, propaganda and a general lack of time to think about the issues in any level depth.
Also, I think one reason I have issues with the ideas of big corporations running everything is that I doubt you will be able to FOI them much. Sure, if you can expose a scandal in a private company, the offenders will lose their job because it's bad for business. And, it's always possible that whistleblowers will be purged and silenced when you are dealing with government shenanigans. But I expect that government (at least in the UK) is far more transparent than private corporations; and therefore less capable of getting away with ripoffs and scandals.
So can someone address those issues from a economist, free-market or whatever perspective?
Yes. In a free market, you expect people to be the least informed on each issue so they can at least select a company that does the service for them. I.e., you want a new plasma TV, you go to radioshack or someplace. Consumer -> Entrepreneur. The entrepreneur acts on decentralized price controls that are subject to everyones evaluations on products and services available in the market. His incentive is to provide something better than others in the market can, more efficiently, etc.
The key problem here is 'be(ing) the least informed'. Without a high standard of learning, a human being is in no way capable of being a rational actor in today's world. This becomes a problem as free market policy actively works against equality as actors in the system in the first place. With privatization of schooling, the divide between privileged and disadvantaged will continue to grow. Then follows the divide between rich and poor. You can see where I'm going with this. If everyone is not given an equal opportunity to succeed, the system is broken from the start.
"Oh thats just bad government, if we get the right people in..." You're not going to get the right people in, ever. The state is a scum institution. It is flame to moths. Sociopaths and thieves of all kinds love the legitimized power they have. The ones who buy them out may be evil, but they're utilizing the cash that's there to be used, because the peons think it's been stolen from them for their own good. Because it's necessary. Yeah it certainly is necessary, necessary for the scum to have a good time maybe.
What makes those people bad, or evil? I assume you would argue they are just that way to begin with, and that is where the true political divide is. A socialist will argue that, in time, the nature of humans can improve, because the majority of the problems in the world are a result of our own carelessness and lack of perspective. People are not good or bad, they become one or the other as a result of their experiences, modified only to a minor degree by genetics. For someone with an open upbringing and ample knowledge of life and the world as a whole, there is little reason to wish to impact anyone else negatively. On the other end of the spectrum, authoritarian treatment and superstition generally lead to perpetuation of the fucked-up, violent, and xenophobic status quo.
It's a bit late for me, so I'll expand more on this if it's not making complete sense. Hopefully, I'll also have some time to respond to a very coherent post a few pages back by Zato-1 that has gone without notice.
Governments attracts evil people because of the power entitled within. Psychopaths can get a badge and beat on people all day, sociopaths get a seat and can toy with peoples lives all day.
I don't ever make the argument for human nature because it can be whatever you want it to be. Objectively, it depends on all those things you said, and to prove any assertion like that is currently impossible. However you do see the difference between saying "man is x" and "the man who wants x will seek x"? I'm not making an inductive argument, I'm saying deductively, the man who seeks to exploit others will be drawn to positions of political power, since that is where he can exploit the most. The state provides an easy plataform for such power. Therefore, it will attract those that want it more than others. You think this is valid reasoning?
I did get a little carried away, when I said "you're never going to have x" I meant that "that's a terrible way to obtain x" due to the premises I've demonstrated in the above paragraph.
If you want a good trade, according to praxeology, you have to seek it voluntarily, or else it's not... it's not a trade. It's theft, duh. And theft is a misallocation of resources, which is always less "efficient" in satisfying all sides. The state only works with the second type of transaction, never with the first. Unless it's a voluntary type of government, lols, if that's not an oxymoron... well it is, but I divert.
Free trade is always good for the consumer. There are several models which help represent the overall gains and losses from trade. In a large price setting country like the USA there should almost always be a tariff on any imported goods. There is a net gain, despite a consumer loss, because of increased domestic production (and possibly an increase in efficiency due to economies of scale) and the tariff fee.
Some of Paul Samuelson's work, particularly the Heckscher–Ohlin model, can be used to calculate optimum tariffs. Of course as a Canadian (a small, price taking country) the last thing I want is a protectionist United States, but there is plenty of economic evidence supporting protectionist theory and opposing completely free trade.
'monopoly' is a dirty word to policy makers and people like the OP.
Ironically, the state that they support is the biggest and one true monopoly of all time... the one which can't be legitimately overthrown, cannot be seceded from, and has to either be watched for eternity, or left to grow to infinity. Damn. Walmart ain't nothing compared to this.
Oh thats right, he didnt even concede that capitalism aka the free market aka the free people are better at organizing themselves rather than st00pid democracy. but ofc he didnt... why would he, it would undermine every reason the state uses to justify itself
On February 01 2010 18:42 QibingZero wrote: Economics is a very, very soft science. It's certainly nothing like engineering or biology, and it's quite disingenuous of you to infer otherwise. Any moderately well-read person is capable of understanding the subject well enough to discuss the real world implications of economic policy. Perhaps instead of lecturing people on their perceived faults, you could be adding something to the conversation?
I'm sorry but I don't think you're right. How do you define 'any moderately well-read person'? Journalists and popular writers continue to get basic economics wrong. This thread is a case in point. There isn't a basic understanding of high school concepts let alone anything relevant to discussing policy.
Why do you have this idea that 'economics is a soft science' so reading the newspaper and some magazines qualifies you to be an expert? It's mind blowing.
'Lecture': An exposition of a given subject delivered before an audience or a class, as for the purpose of instruction. The OP is lecturing. I am not. But he does not understand his subject and therefore really isn't in a position to give instruction. I am merely pointing that out.
My addition to the conversation is simple and not really so unreasonable either. If you're interested in economics, do some reading. Pick up a popular economics book to start. I recommend Undercover Economist by Tim Harford, an editor of the Financial Times. Then have a look at some basic undergraduate texts and see how you go from there.
On February 01 2010 18:42 QibingZero wrote: Economics is a very, very soft science. It's certainly nothing like engineering or biology, and it's quite disingenuous of you to infer otherwise. Any moderately well-read person is capable of understanding the subject well enough to discuss the real world implications of economic policy. Perhaps instead of lecturing people on their perceived faults, you could be adding something to the conversation?
I'm sorry but I don't think you're right. How do you define 'any moderately well-read person'? Journalists and popular writers continue to get basic economics wrong. This thread is a case in point. There isn't a basic understanding of high school concepts let alone anything relevant to discussing policy.
Why do you have this idea that 'economics is a soft science' so reading the newspaper and some magazines qualifies you to be an expert? It's mind blowing.
'Lecture': An exposition of a given subject delivered before an audience or a class, as for the purpose of instruction. The OP is lecturing. I am not. But he does not understand his subject and therefore really isn't in a position to give instruction. I am merely pointing that out.
My addition to the conversation is simple and not really so unreasonable either. If you're interested in economics, do some reading. Pick up a popular economics book to start. I recommend Undercover Economist by Tim Harford, an editor of the Financial Times. Then have a look at some basic undergraduate texts and see how you go from there.
What's mind blowing is that you think you're smart enough to call other people stupid. HF with your undergrad courses. I'm sure they make you feel super special.
On February 01 2010 18:42 QibingZero wrote: Economics is a very, very soft science. It's certainly nothing like engineering or biology, and it's quite disingenuous of you to infer otherwise. Any moderately well-read person is capable of understanding the subject well enough to discuss the real world implications of economic policy. Perhaps instead of lecturing people on their perceived faults, you could be adding something to the conversation?
I'm sorry but I don't think you're right. How do you define 'any moderately well-read person'? Journalists and popular writers continue to get basic economics wrong. This thread is a case in point. There isn't a basic understanding of high school concepts let alone anything relevant to discussing policy.
Why do you have this idea that 'economics is a soft science' so reading the newspaper and some magazines qualifies you to be an expert? It's mind blowing.
'Lecture': An exposition of a given subject delivered before an audience or a class, as for the purpose of instruction. The OP is lecturing. I am not. But he does not understand his subject and therefore really isn't in a position to give instruction. I am merely pointing that out.
My addition to the conversation is simple and not really so unreasonable either. If you're interested in economics, do some reading. Pick up a popular economics book to start. I recommend Undercover Economist by Tim Harford, an editor of the Financial Times. Then have a look at some basic undergraduate texts and see how you go from there.
What's mind blowing is that you think you're smart enough to call other people stupid. HF with your undergrad courses. I'm sure they make you feel super special.
ur st00pidz lolololos u cantz giev instructionz Ok I swear this was the last meaningless post.
On February 01 2010 18:42 QibingZero wrote: Economics is a very, very soft science. It's certainly nothing like engineering or biology, and it's quite disingenuous of you to infer otherwise. Any moderately well-read person is capable of understanding the subject well enough to discuss the real world implications of economic policy. Perhaps instead of lecturing people on their perceived faults, you could be adding something to the conversation?
I'm sorry but I don't think you're right. How do you define 'any moderately well-read person'? Journalists and popular writers continue to get basic economics wrong. This thread is a case in point. There isn't a basic understanding of high school concepts let alone anything relevant to discussing policy.
Why do you have this idea that 'economics is a soft science' so reading the newspaper and some magazines qualifies you to be an expert? It's mind blowing.
'Lecture': An exposition of a given subject delivered before an audience or a class, as for the purpose of instruction. The OP is lecturing. I am not. But he does not understand his subject and therefore really isn't in a position to give instruction. I am merely pointing that out.
My addition to the conversation is simple and not really so unreasonable either. If you're interested in economics, do some reading. Pick up a popular economics book to start. I recommend Undercover Economist by Tim Harford, an editor of the Financial Times. Then have a look at some basic undergraduate texts and see how you go from there.
What's mind blowing is that you think you're smart enough to call other people stupid. HF with your undergrad courses. I'm sure they make you feel super special.
ur st00pidz lolololos u cantz giev instructionz Ok I swear this was the last meaningless post.
It really isn't. He replied to a pure argument from authority with no content by telling him that he isn't an authority.
On January 31 2010 01:22 ParasitJonte wrote: "You're right. Calling somebody a whore, is not in the least misogynistic."
No, it's not. Read the definition... Would you also portray me as misandrist if I call George Bush a whore?
""Naomi Klein is a liar" in particular is a video that purports to hate Klein's 'smear' campaign while doing exactly the same thing itself."
Yes, I don't like videos like that either but it makes the simple point that she is a liar. Why? Not because her statements are in conflict, but because that video has been thoroughly prepared and reviewed before going into production. And Friedman never said the military should be privitized.
"Here is Friedman during the war ..."
Notice that it doesn't say anywhere that he actually supports the war. Read the questions and the answers.
"So, his two main points. First he says she quoted Friedman out of context, "real change comes after a crisis". He follows up by saying "If you look at the real quote"... then doesn't say anything about the quote at all. Whoops."
Well, I own the book so I know the quote; not memorized though. Anyways, the way Klein presents it in her video and at her speeches is disingenuous to say the least. You can probably find the real quote on amazon by previewing the book if you're interested.
"In my eyes, lying factually about, and distorting the message of, a talented reporter is disgusting."
She is not a talented reporter. She is an anti-capitalist lying piece of scum. That aside, it just so happens that you can find ALL her smeartalking and distortions in her book and on youtube. She doesn't even try to hide it.
Would you please explain why she talks about Milton Friedman while showing those kinds of pictures and then continuing with that narrator thingy taken from some CIA book perhaps? She paints a very false picture and she is not an honest person.
If you truly believe that Johan Norberg is the one that cannot be trusted here then you will have to find yourself on the far left edge of society with very few supporters. That doesn't mean that you are wrong of course; but I'm trying to put things in context here a bit.
Her underlying claim throughout the entire book is that free market libertarians somehow need or support military dictatorships. It's a work of fiction; and not a very good one.
I really can't believe you're still trying to defend your "Naomi Klein is a whore" statement.
You presented the videos as a king hit by a apparently well respected analyist. I showed them to be full of crap and the best you can come up with in response is a bit of vague handwaving about how you have the actual quote and how Friedman doesn't specifically say "I support the war in Iraq".
Then you launch back into your hatred and unsubstantiated personal opinions. Good one.
Forgot about this thread. Perhaps a mistake to bring it back up, but I guess I should at least try to defend myself.
No, you did not show that they were full of crap. And, yes, I will have to reiterate that Friedman, obviously, never explicitly said that he was in support of the war. It doesn't even sound like that in the interview. But if you want it to sound like that, then that is how you will read it.
Look, I have hatred against Klein (and that's why I just go ad hominem at her instead of really giving serious critique to her statements - because that would just be a waste of time) because she's not a fair player.
I'll give you just a single example. Like I said, there are tons of examples. This is an unedited video of one of Klein's talks. Just go to ~4:30 and listen to the end. Listen to the way she tries to portray Friedman at the very end. Now, what I take offense to is not the fact that Klein has a different opinion on politics & economy. Debating is great. But just listen to how she paints the picture of this brutal, inconsiderate man who would rush at any disaster as an opportunity to spread his ideas (and fuck the people). In her words: "this is how he spent his last energy, was thinking about how to take advantage of the people of New Orleans in their weakest moment..."
Actually, I'll give you the single best example of how "talented" Naomi Klein is. And what she bases her "serious" and "well-researched" theories on. Again, this is an unedited video. Just jump to 1:52 (or watch it all if you want to) and just listen.
Now, as funny as it may seem, this is actually Klein's coup de grace against Friedman and his companions. Now, let's put the actualy quote into context. Here's the part of the 1982 preface of Capitalism and Freedom from which the quote is taken:
[Note: Prior to the text below Friedman talks about how the climate has changed (regarding peoples interest in libertarian ideas) since he first released his book in the 1960s and now (that is 1982).]
START The change in the climate of opinion was produced by experience, not by theory or philosophy. Russia and China, once the great hopes of the intellectual classes, had clearly gone sour. Great Britian, whose Fabian socialism exercised a dominant influence on American intellectuals, was in deep trouble. Closer to home, the intellectuals, always devotees of big government and by wide majorities supporters of the na- tional Democratic party, had been disillusioned by the Vietnam War, particularly the role played by Presidents Ken- nedy and Johnson. Many of the great reform programs--such guidons of the past as welfare, public housing, support of trade unions, integration of schools, federal aid to education, affirmative action--were turning to ashes. As with the rest of the population, their pocketbooks were being hit with infla- tion and high taxes. These phenomena, not the persuasive- ness of the ideas expressed in books dealing with principles, explain the transition from the overwhelming defeat of Barry Goldwater in 1964 to the overwhelming victory of Ronald Reagan in 1980--two men with essentially the same program and the same message.
What then is the role of books such as this? Twofold, in my opinion. First, to provide subject matter for bull sessions. As we wrote in the Preface to Free to Choose: "The only person who can truly persuade you is yourself. You must turn the issues over in your mind at leisure, consider the many argu- ments, let them simmer, and after a long time turn your pref- erences into convictions."
Second, and more basic, to keep options open until circum- stances make change necessary. There is enormous inertia--a tyranny of the status quo--in private and especially gov- ernmental arrangements. Only a crisis--actual or perceived--produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and avail- able until the politically impossible becomes politically in- evitable.
A personal story will perhaps make my point. Sometime in the late 1960s I engaged in a debate at the University of Wisconsin with Leon Keyserling, an unreconstructed collec- tivist. His clinching blow, as he thought, was to make fun of my views as utterly reactionary, and he chose to do so by reading, from the end of chapter 2 of this book, the list of items that, I said, "cannot, so far as I can see, validly be justified in terms of the principles outlined above." He was doing very well with the audience of students as he went through my castigation of price supports, tariffs, and so on, until he came to point 11, "Conscription to man the military services in peacetime." That expression of my opposition to the draft brought ardent applause and lost him the audience and the debate.
Incidentally, the draft is the only item on my list of four- teen unjustified government activities that has so far been eliminated--and that victory is by no means final. In respect of many of the other items, we have moved still farther away from the principles espoused in this book--which is, on one hand, a reason why the climate of opinion has changed and, on the other, evidence that that change has so far had little practical effect. Evidence also that the fundamental thrust of this book is as pertinent to 1981 as to 1962, even though some examples and details may be outdated. END
Now compare this to what Johan Norberg said (it's at the beginning):
Actually, now that you got me started I have to post a final example. Again, here's a video from onf of Klein's enlightening talks:
List to what she says. Listen to how she makes it seem as if Friedman was somehow involved in what happened in Chile and has since then tried to erase it. Now, let's listen to what Friedman himself says regarding his involvement in Chile (jump to ~8:48):
The second part is here:
Edit: Also not how the people in the video with Friedman show how you perform a real, fair and honest debate even though you have separating views.
Now, the way I see it, what's currently taught in economics and finance classes in America is this concept of globalization, free market, capitalism, and less taxes/regulation = increased economic prosperity.
The OP obviously hasn't done an economics or finance degree.
At least in my experience of doing such subjects these concepts were neither good or bad. It had a lot more to do with how people used it, just like everything.
EPT
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