After someone started to threadjack this thread I decided to put this here so as to leave the original thread be. This topic is serious, but that doesn't mean the talk must be. I would, however, like to keep it in good form - a joke's a joke, but you can take it too far.
I am strongly for free market economics. So when someone says that capitalism can't work without stupid people, I challenge it!
My qualifications: I'm in my senior year of getting a degree in Finance, with an Economics concentration.
My contention: capitalism works just fine, and does not require stupidity to function.
Definitions: When I say capitalism, I mean a free economy where government's only function is to enforce rights of life, liberty, and property. Contrast this to a command economy where government controls the means of production and distribution of goods. A mixed economy has some elements of government control and regulation, while other elements are privatized.
I see your economics concentration, and raise you a minor in economics. :)
I think capitalism can and does work. I don't think laissez-faire capitalism is a good idea, however, for various reasons. Briefly:
1. Imperfect information. See prisoner's dilemma.
2. Negative externalities (pollution, etc), aka the tragedy of the commons.
3. Poor corporate accountability.
4. Strong incentives exist to maximize short-term profits at the expense of long-term prosperity.
5. Unfettered inheritance causes capital to accumulate inefficently.
...and those are just off the top of my head.
Admittedly, the last few are probably specific to the modern United States economy, but the first few are unavoidable, at least as far as I know.
The bit about capitalism and stupid people is just silly.
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I too got my degree in economics, so that is my claim to expertise.
GE, I think your points are well taken, but overstated. These are some of the weaknesses in a pure capitalist society.
However, I still think capitalism is the way to go. Often we find a flaw with a social institution and in our haste to correct it we toss the baby with the bathwater.
My studies have shown me that the lack of social mobility is a problem in any economic system. The truth is that the people at the top like it there. This goes for ANY country you can think of.
I think your chances of advancement in a capitalist system are (though difficult) actually better than any other system.
The intelligence of the masses is assumed in the basic economic model with man being called homo economicus which means a man who always acts in his own best interest. This freedom to act in ones best interest is the basis for a capitalist society.
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bugleyman,
number 1 is not really of any concern unless everyone does not have the same handicap. Insider trading is serious because it breaks this trust and gives some special knowledge.
number 2 is easily fixed by assigning private property rights. For example Mega Chem Corp sits at the top of the river. They want to dump things into the river. We can give them the river. In this model, the homowners and other concerned could raise capital to prevent this pollution. Or we could give the river to the people (I like this better) and the Corp would need to arrive at a deal to dump in the river by consulting the owners of the river. How much is your reduced house value worth?
number 3 is culturally influenced and could certainly be changed by eliminating laws that limit liability to a corp. You cause x amount of damage? You pay for it. The tricks BP is trying to play in the gulf should be criminal.
number 4 is an over generalization. There are any number of companuies that are in it for the long haul and are commited to delivering brand excellence.
number 5 is really a very minor concern as well. Those that accumulate wealth quite often leave it to those with not a clue (When Paris becomes CEO, sell your shares in the Hilton!!!), and the actual cases of large transfers is so infrequent that it almost is not worth mentioning.
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The concept evolved to mean something like people that isn't very intelligent or have got a poor education, prolly unskilled workers or people that is easy to manipulate.
The bit about capitalism and stupid people is just silly.
To this I always have to ask... If this American capitalism is so unfair and oppressive to the worker, especially the unskilled worker, why do we have millions of illegal immigrants here? They see that they have a better chance here than anywhere.
To this I always have to ask... If this American capitalism is so unfair and oppressive to the worker, especially the unskilled worker, why do we have millions of illegal immigrants here? They see that they have a better chance here than anywhere.
First, the U.S. isn't a pure capitalist economy. Second, there are other factors at play in that decision other than economics. Finally, it's perfectly possible to level legitimate criticisms at our system, and yet still have it be the best (or one of the best) games in town.
bugleyman,
number 1 is not really of any concern unless everyone does not have the same handicap. Insider trading is serious because it breaks this trust and gives some special knowledge.number 2 is easily fixed by assigning private property rights. For example Mega Chem Corp sits at the top of the river. They want to dump things into the river. We can give them the river. In this model, the homowners and other concerned could raise capital to prevent this pollution. Or we could give the river to the people (I like this better) and the Corp would need to arrive at a deal to dump in the river by consulting the owners of the river. How much is your reduced house value worth?
number 3 is culturally influenced and could certainly be changed by eliminating laws that limit liability to a corp. You cause x amount of damage? You pay for it. The tricks BP is trying to play in the gulf should be criminal.
number 4 is an over generalization. There are any number of companuies that are in it for the long haul and are commited to delivering brand excellence.
number 5 is really a very minor concern as well. Those that accumulate wealth quite often leave it to those with not a clue (When Paris becomes CEO, sell your shares in the Hilton!!!), and the actual cases of large transfers is so infrequent that it almost is not worth mentioning.
Hmmm. I respectfully disagee. Imperfect information is not the same as equal information, and does in fact introduce inefficiencies. The aforementioned prisoner's dilemma is an example of this.
I have also yet to see any sort of universally acceptable model for capturing and compensating for negative externalities, and in the absence of such a system, governmental intervention is required. There goes laissez-faire.
However, upon further consideration, I don't want to get into a debate. Nothing personal, but I've had too many of those devolve into pedantry and one-upmanship lately.
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bugleyman... go in peace. Your arguments are sound and though we differ in our conclusion you clearly know your stuff.
You root your mind in the world of the practical, and I in the possible, and which is better? Who can say.
I think in the end we agree anyway. This system may not be perfect, but it is the best one we have.
Definitions: When I say capitalism, I mean a free economy where government's only function is to enforce rights of life, liberty, and property. Contrast this to a command economy where government controls the means of production and distribution of goods. A mixed economy has some elements of government control and regulation, while other elements are privatized.
I'd have to say that this very rigid, binary definition probably offers nothing but woe -- the worst of all worlds.
Communism/government-owned markets don't work -- we've seen that firsthand. But it's equally true that totally unregulated markets don't work (and are nothing a free-for-all forum for screwing over one another, and evertything else, in pursuit of profit) -- we've seen that firsthand, too (think the age of the Robber Barons, only worse).
Regulation isn't all or nothing, nor do I think it should be. The best solution would probably be to apply regulation sparingly, as needed, rather than wholesale. And that would be a learning experience -- a bubble bursts, we analyze why, and then apply just enough leverage to prevent it in the future. There is no "magic bullet" solution to fix all problems before they occur. And blind faith in the magical miracle properties of a totally unregulated market is a head-in-the-sand approach, as near as I can tell.
Whoah! This got some responses fast! I'm short on time so I'll give short answer now and try to come back with more detail/better arguments later. ;) I will give one general amendment, however - there are cases where capitalism has short-term trouble, but these issues are fixed over the long run. Further, any issue where capitalism has short-term troubles, any other system will handle at least as badly, if not worse.
My experience of capitalism is that the rich get richer and social-mobility is a laugh.
Historically, capitalism actually has the BEST opportunity for social mobility. The rich often do get richer, because they learn how to invest their money to make more money, but an often overlooked fact is that the poor also get richer, just not as fast. In short, everyone benefits, just the greatest benefit is had by those who learn to invest wisely.
Capitalism can't work without stupid people and idiots...
My original disagreement. Nothing about the idea of voluntary exchange requires either party to be an idiot.
...the Culture Of Consumerism would be plain dead without 'em.
This, I might agree with. A free market allocates resources according to the values of the society. If those values are good, the allocation will be as well. If the values aren't good, the allocation will be problematic. Having said that, a view of "good" vs. "bad" allocation is a matter of personal belief, and attempts to change the allocation without altering the underlying values causes problems.
1. Imperfect information. See prisoner's dilemma.
2. Negative externalities (pollution, etc), aka the tragedy of the commons.
3. Poor corporate accountability.
4. Strong incentives exist to maximize short-term profits at the expense of long-term prosperity.
5. Unfettered inheritance causes capital to accumulate inefficently.
1. This causes the short term bumps in the road, but these don't last long. If some people start making a high economic profit, others will look for the reasons why. Prices are the mechanism of information transfer, so this isn't really a problem.
2. This is an issue of property rights. If your pollution damages my airspace, waterways, land, etc. I can sue you. As you said, tragedy of the commons - this only becomes a problem when the affected property doesn't belong to anyone, but is held "in public".3 & 4. This is the principal-agent problem, and is also short term. If a company executive consistently acts against the interests of shareholders, he will be replaced.
5. The people who receive inheritance will either invest wisely (in which case the resources are used efficiently), or they will invest poorly (in which case the resources will leave them and go to people who are investing wisely). Either way, inheritance doesn't cause inefficiency.
Out of time for now, I'll answer more later.
Unregulated capitalism is like unrestrained communism: a disaster for a lot of people. If you place the right restraints on capitalism that emphasis certain ideals above pure profit, and provide sufficient social care for those not favoured by the system you can have a workable system that actually delivers a measure of opportunity, prosperity and justice. Or in other words, combine the best aspects of communism with the best aspects from capitalism and you get a workable system.
Is the point about stupid people that you need them to buy a bunch of stuff from you they don't need?
If everyone was smart, capitalism/free markets would still work, but to make money you would have to come up with something that people either a) need or b) really like/want.
1.
What is up with the problem(s) concerning stupid people?
Intelligence is certainly not uniform across the human population. There is a spectrum for intelligence, and no matter what we do there will always be stupid people and there will always be smart people.
2.
As smart people, we put the stupid people to work and pay them a wage, so they can buy housing and food.
If you're a stupid person, there is probably not a lot you can do to change your situation.
3.
Capitalism doesn’t mean everyone gets rich, or everyone is happy, or even everyone leads a healthy, productive life. These are middle-class values. I believe, for the most part, the people who post here are middle-class, so I understand why these sentiments are at the center of your concerns.
bugleyman,
number 1 is not really of any concern unless everyone does not have the same handicap. Insider trading is serious because it breaks this trust and gives some special knowledge.number 2 is easily fixed by assigning private property rights. For example Mega Chem Corp sits at the top of the river. They want to dump things into the river. We can give them the river. In this model, the homowners and other concerned could raise capital to prevent this pollution. Or we could give the river to the people (I like this better) and the Corp would need to arrive at a deal to dump in the river by consulting the owners of the river. How much is your reduced house value worth?
Number 1:
Base the model on something that doesn't exist and then defend the model on that assumption?First order approximations are good and necessary but the map is not the territory.
Number 2:
So get a group of people together and enforce their will?
This is often called Government and regulation.
Similarly you state "government's only function is to enforce rights of life, liberty, and property" as an apriori fact.
Personal I don't agree with this definition of government. I don't have one that's strong and consistent but my fuzzy one is more about people that property. Something along the lines of enhancing the happiness of its citizens.
So then the question is - can an economic discussion occur with out a definition of the governmental value system.
I'm not convince but it would be interesting to see.
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The rich often do get richer, because they learn how to invest their money to make more money, but an often overlooked fact is that the poor also get richer, just not as fast. In short, everyone benefits, just the greatest benefit is had by those who learn to invest wisely.
The greatest benefit is had by those who have the greatest capital to invest in the first place.
You can learn as much as you like about how to invest wisely but if you lack capital that knowledge is useless to you.I was talking specifically about laissez-faire capitalism: I would rather be poor in Sweden or Denmark than be poor in a system of 'pure' capitalism.
In my country the greatest opportunities for social mobility come from education. This is constricted by uneven access (massive private school system, limited support for poor students to afford university). In a true laissez-faire system we would, presumably, find no public education and the gap in available education would be much wider.
Whoah! This got some responses fast! I'm short on time so I'll give short answer now and try to come back with more detail/better arguments later. ;) I will give one general amendment, however - there are cases where capitalism has short-term trouble, but these issues are fixed over the long run. Further, any issue where capitalism has short-term troubles, any other system will handle at least as badly, if not worse.
My experience of capitalism is that the rich get richer and social-mobility is a laugh.Historically, capitalism actually has the BEST opportunity for social mobility. The rich often do get richer, because they learn how to invest their money to make more money, but an often overlooked fact is that the poor also get richer, just not as fast. In short, everyone benefits, just the greatest benefit is had by those who learn to invest wisely.
I would argue that your counterpoint is only true in the short-term due to inflation and other market issues. The wealthy/rich-that-get-richer are the ones who truly define what the ideal of "rich" is, and as they get richer, that ideal changes, sometimes rapidly. It would take a *serious* change in economic fortunes to affect this class as a whole(I emphasize those last words), which has happened only once or twice in american history. In short, goal posts are in constant motion on the "wealthy" angle.
Capitalism can't work without stupid people and idiots...My original disagreement. Nothing about the idea of voluntary exchange requires either party to be an idiot.
I don't think capitalism needs idiots, however, it DOES need a type of underclass. Not necessarily those who lack intelligence, per se, but those who lack a certain upward mobility to eternally provide a labor pool to draw from, preferably one willing to work at a certain economic level(not working poor, per se, but close enough to it) to ensure profits for their company.
...the Culture Of Consumerism would be plain dead without 'em.This, I might agree with. A free market allocates resources according to the values of the society. If those values are good, the allocation will be as well. If the values aren't good, the allocation will be problematic. Having said that, a view of "good" vs. "bad" allocation is a matter of personal belief, and attempts to change the allocation without altering the underlying values causes problems.
Agreed.
1. Imperfect information. See prisoner's dilemma.
2. Negative externalities (pollution, etc), aka the tragedy of the commons.
3. Poor corporate accountability.
4. Strong incentives exist to maximize short-term profits at the expense of long-term prosperity.
5. Unfettered inheritance causes capital to accumulate inefficently.1. This causes the short term bumps in the road, but these don't last long. If some people start making a high economic profit, others will look for the reasons why. Prices are the mechanism of information transfer, so this isn't really a problem.
2. This is an issue of property rights. If your pollution damages my airspace, waterways, land, etc. I can sue you. As you said, tragedy of the commons - this only becomes a problem when the affected property doesn't belong to anyone, but is held "in public".
3 & 4. This is the principal-agent problem, and is also short term. If a company executive consistently acts against the interests of shareholders, he will be replaced.
5. The people who receive inheritance will either invest wisely (in which case the resources are used efficiently), or they will invest poorly (in which case the resources will leave them and go to people who are investing wisely). Either way, inheritance doesn't cause inefficiency.
1. I would argue that the people who have the time to look for reasons why others are making a high economic profit are within one step of the leisured class that has the time to make that high economic profit. Everyone else is too busy working for a living, although there are exceptions.
2. Agreed, but this happens too often for my liking.3&4. This happens at a pace so slow, it makes glaciers look like a highway speed gun cop's dream. I would argue by the time the person is replaced, they have made so much money they may not have to work again. The shareholder/CEO relationship -once you pass a certain point in terms of company size- is, unfortunately, corrupted on a level that staggers the mind.
5. I have to disagree with you here. Inheritances aren't just going to spoiled brats who can't wait to spend daddy's money- they also go to business partners, corporations, organizations, charities; individuals/groups that by dint of their being could keep the money out of the economy and very much in the same places they were before the inheritance. It moves, but not far enough to be considered efficient, per se.
Hmm, guess I should have read the whole thread before responding. :D
Sigil already brought up property rights, but Estergum brought up an important point, I think - collectively assigning something to a group isn't a property rights issue anymore, it is a government issue. I'd say that you would have to assign individual portions of the river in question to each person, and enforce those rights; collectively doing so as "the people" is what we do now and polluting plant winds up with more sway over regulating bodies than the homeowners. (Then again, this may be what Sigil meant.) I have, however, said from the beginning that government should exist to protect property rights. If I can use your property without reprisal, then property rights are effectively meaningless. Free markets require property rights, and a system is needed to enforce property rights, government being the best equipped. Saying that government here represents intrusive force and so isn't laissez-faire isn't entirely accurate. Yes, you still have coercive force, but only to prevent other coercive force. Compare this to regulations which often prohibit people from free cooperation or use of their own property.
Similarly you state "government's only function is to enforce rights of life, liberty, and property" as an apriori fact.
Personal I don't agree with this definition of government. I don't have one that's strong and consistent but my fuzzy one is more about people that property. Something along the lines of enhancing the happiness of its citizens.
Problem is, that happiness comes at a price - nothing is free. Someone has to pay it, and if you are taking more from someone than they are gaining, they will become unhappy. You might be able to justify this with a utilitarian argument, that it is okay to make one person unhappy if you make ten happy, but in that case you should be okay with it if I steal your car, sell it, and donate the proceeds to ten other people. They'll be happier, at your expense, but since more people are happy than unhappy in this exchange it works.
Even though bugleyman bowed out of the thread, I feel I should still address the Prisoner's Dilemma. This only becomes a problem because the prisoners are prevented from communicating with each other. Yes, each of them acting on their own goals leads to non optimal outcomes, but remove the inability to communicate, and allow for repeat situations, and the outcomes change.
Kirth Gerson brought up Robber Barons. I'll cover that in a moment, as well as responding to GeraintElberion and Freehold DM.
(Sorry if this post tended to skip around more than other. Consequence of responding to a thread rather than individual posts.)
Robber Barons often get brought up as an example of the evils of unrestrained capitalism. This ignores an important point - the railroad industry was NOT pure capitalism.
For example, Central Pacific Railroad's owner Leland Stanford was a former governor and senator of California, and used political connections to make it illegal to compete with CP. Both Central Pacific and Union Pacific received subsidies to lay tracks, so much per mile. This led to them taking winding routes that maximized mileage, rather than making their companies more efficient. In some cases, the rush for government money led to poor decisions over track placements, and building costs tripled. Much of the profit earned from government subsidies went back to the government in the form of personal payments to lawmakers and political figures.
Compare this to James J. Hill's Great Northern Railroad, which he financed entirely himself, and didn't rely on regulations to limit his competition. He found ways to cut costs and passed these on to his customers - providing a better product for a lower price. He also knew that his success depended on his customers being successful, so he helped local farmers both with advice and with private grants. Customers of the GNR profited, and Hill profited, without any government assistance or regulation. He made his fortune by actually providing a valuable service to people who also profited from his entrepreneurship.
So what happened? People started to complain about the business practices of railroads like CP and UP, and the Federal Government responded with the Interstate Commerce Act of 1887. This forced all railways to charge the same rates, "to protect consumers". Of course, this further limited competition, benefiting the wasteful UP and CP, but it severely curtailed Hill's Great Northern, who was making lots of money by offering lower prices!
Summary: The "Robber Barons" aren't what happens when capitalism is unrestrained, they are the result of government interference in the market!
The greatest benefit is had by those who have the greatest capital to invest in the first place. You can learn as much as you like about how to invest wisely but if you lack capital that knowledge is useless to you.
True, and that's one of the reasons I hate the huge amounts taken out of paychecks. If the government wasn't taking so much of our income, we'd have a chance to invest it ourselves. My aforementioned example of James J. Hill, above, dropped out of school at 14 to help support his family when his father died. He worked in blue collar jobs for years, but eventually saved up enough to start investing his money. Of course, even with the high rates of taxation, there are ways to secure capital even today, you just have to borrow more, which makes it riskier.
In my country the greatest opportunities for social mobility come from education. This is constricted by uneven access (massive private school system, limited support for poor students to afford university). In a true laissez-faire system we would, presumably, find no public education and the gap in available education would be much wider.
I don't know what country you are from, but I do know there are countries where education is public all the way through college. Brazil, for example - you can get a bachelor's degree for free. Sadly, so many people take advantage of this that the schools can't effectively teach, and largely the degrees are practically worthless. The degrees from private institutions, on the other hand, can get you far.
I would argue that your counterpoint is only true in the short-term due to inflation and other market issues. The wealthy/rich-that-get-richer are the ones who truly define what the ideal of "rich" is, and as they get richer, that ideal changes, sometimes rapidly. It would take a *serious* change in economic fortunes to affect this class as a whole(I emphasize those last words), which has happened only once or twice in american history. In short, goal posts are in constant motion on the "wealthy" angle.
I'm not sure I entirely follow you. However, all but the very poorest in the United States have a much, much higher standard of living compared with much of the world. This has been true for some time, and is not a product of inflation.
I don't think capitalism needs idiots, however, it DOES need a type of underclass. Not necessarily those who lack intelligence, per se, but those who lack a certain upward mobility to eternally provide a labor pool to draw from, preferably one willing to work at a certain economic level(not working poor, per se, but close enough to it) to ensure profits for their company.
Corporate profits aren't a result of exploiting workers. Often, they simply realize economies of scale. If you had two people (let's say a butcher and a baker) engaged in free trade, both would be profiting from the trade (otherwise one of them wouldn't be doing it) and yet both are working. By your logic, the butcher is exploiting the baker or the baker is exploiting the butcher, but trade isn't a zero-sum game. The butcher has more meat than bread, and so values bread more highly. The baker has more bread than meat, so values meat more highly. They trade as long as this is the case - and because their valuation of each item is relative to their preferences, they both profit. Now, the baker might think the butcher is stupid for his preferences, but that doesn't mean he is exploiting the butcher by trading with him.
1. I would argue that the people who have the time to look for reasons why others are making a high economic profit are within one step of the leisured class that has the time to make that high economic profit. Everyone else is too busy working for a living, although there are exceptions.
I think I'd counterargue that nobody spends their entire life either working or sleeping, and the exceptions are those who invest some of what they do have (their free time) into learning. If someone chooses to invest all of their free time into other things, that don't offer some kind of return, that isn't a problem with the system, it is a problem with their preferences.
3&4. This happens at a pace so slow, it makes glaciers look like a highway speed gun cop's dream. I would argue by the time the person is replaced, they have made so much money they may not have to work again. The shareholder/CEO relationship -once you pass a certain point in terms of company size- is, unfortunately, corrupted on a level that staggers the mind.
Perhaps. I think the size of some companies has less to do with economics and more to do with the difficulty of entering markets, which is partly political. If it were easier to compete with these companies, investors would be quicker to oust inefficient CEOs. In fact, this has happened rather quickly in more competitive industries.
5. I have to disagree with you here. Inheritances aren't just going to spoiled brats who can't wait to spend daddy's money- they also go to business partners, corporations, organizations, charities; individuals/groups that by dint of their being could keep the money out of the economy and very much in the same places they were before the inheritance. It moves, but not far enough to be considered efficient, per se.If they are still earning very high rates of return, then the money is still being used efficiently. If the money could be better used elsewhere, then these better educated people will get a higher rate of return by investing there. Keeping the money where it is when there are better options is a poor choice, and the lower rates they will get will mean higher returns for someone else, who is investing better.
Summary: The "Robber Barons" aren't what happens when capitalism is unrestrained, they are the result of government interference in the market!
Oh come now. Noone from the government was putting a gun to Stanford's head making him do those things. The government stepped in and evened the playing field. Certainly, this was to Hill's disadvantage- and he should be lauded for his responsiblity- but to say that the Robber Barons are the government's handiwork is similar to saying that a store owner forced a robber to hold up his store because he indirectly caused the robber's business to fail. What Hill did doesn't make what Stanford did okay.
GraintEon wrote:
The greatest benefit is had by those who have the greatest capital to invest in the first place. You can learn as much as you like about how to invest wisely but if you lack capital that knowledge is useless to you.True, and that's one of the reasons I hate the huge amounts taken out of paychecks. If the government wasn't taking so much of our income, we'd have a chance to invest it ourselves. My aforementioned example of James J. Hill, above, dropped out of school at 14 to help support his family when his father died. He worked in blue collar jobs for years, but eventually saved up enough to start investing his money. Of course, even with the high rates of taxation, there are ways to secure capital even today, you just have to borrow more, which makes it riskier.
James J. Hill was not living in 2010. The economic, educational, and entreprenural systems were COMPLETELY different in his time, to the point that it is truly unfair to compare to the two.
GeraintElberion wrote:
In my country the greatest opportunities for social mobility come from education. This is constricted by uneven access (massive private school system, limited support for poor students to afford university). In a true laissez-faire system we would, presumably, find no public education and the gap in available education would be much wider.I don't know what country you are from, but I do know there are countries where education is public all the way through college. Brazil, for example - you can get a bachelor's degree for free. Sadly, so many people take advantage of this that the schools can't effectively teach, and largely the degrees are practically worthless. The degrees from private institutions, on the other hand, can get you far.
I would say this varies wildly depending on what job you get. The degree simply gets your foot in the door, in my experience. From there, it's entirely up to you. Just because something is free doesn't mean it's worthless- if you don't believe me, see how long you can hold your breath.
FreeholdDM wrote:
I would argue that your counterpoint is only true in the short-term due to inflation and other market issues. The wealthy/rich-that-get-richer are the ones who truly define what the ideal of "rich" is, and as they get richer, that ideal changes, sometimes rapidly. It would take a *serious* change in economic fortunes to affect this class as a whole(I emphasize those last words), which has happened only once or twice in american history. In short, goal posts are in constant motion on the "wealthy" angle.I'm not sure I entirely follow you. However, all but the very poorest in the United States have a much, much higher standard of living compared with much of the world. This has been true for some time, and is not a product of inflation.
Maybe we're having two different conversations here. My comments above were aimed at the idea of someone being rich and/or wealthy, not necessarily the standard of living they are at. Those are two different things, and we may be going in two different directions. In terms of standard of living, many other countries are quite compatible with the US, something that is often forgotten in standard of living arguments- it's not that we're at the top of the heap in that respect- others are capable of living comfortably as well.
FreeholdDM wrote:
1. I would argue that the people who have the time to look for reasons why others are making a high economic profit are within one step of the leisured class that has the time to make that high economic profit. Everyone else is too busy working for a living, although there are exceptions.I think I'd counterargue that nobody spends their entire life either working or sleeping, and the exceptions are those who invest some of what they do have (their free time) into learning. If someone chooses to invest all of their free time into other things, that don't offer some kind of return, that isn't a problem with the system, it is a problem with their preferences.
Education is extremely, extremely important, however it has little to do with my statement. Tracking economic trends is a job in and of itself, and if you aren't working in the field or have the capital to hire the services of someone who does, then you really aren't going to make the kind of money that I was thinking of when I made that statement. Sure- anyone can look at wall street data and learn to interpret it and even attempt to make predictions, but when you get into the amounts of money that make people's palms itch(five digits at least), you are usually talking about people who either do this for a living or are financially set and so have a lot of time on their hands to spend learning the "game". Not to put words in your mouth, but your last statement sounds a lot like "it's the poor's fault they're poor". Socio-economic mobility from the top looking down seems a lot easier than when you're on the bottom looking up. It's not easy to balance a portfolio when you're working 8+ hours a day. Not that there aren't people that do it, but there aren't nearly so many as to make your statement gospel.
FreeholdDM wrote:
3&4. This happens at a pace so slow, it makes glaciers look like a highway speed gun cop's dream. I would argue by the time the person is replaced, they have made so much money they may not have to work again. The shareholder/CEO relationship -once you pass a certain point in terms of company size- is, unfortunately, corrupted on a level that staggers the mind.Perhaps. I think the size of some companies has less to do with economics and more to do with the difficulty of entering markets, which is partly political. If it were easier to compete with these companies, investors would be quicker to oust inefficient CEOs. In fact, this has happened rather quickly in more competitive industries.
What industries are you referring to?
FreeholdDM wrote:
5. I have to disagree with you here. Inheritances aren't just going to spoiled brats who can't wait to spend daddy's money- they also go to business partners, corporations, organizations, charities; individuals/groups that by dint of their being could keep the money out of the economy and very much in the same places they were before the inheritance. It moves, but not far enough to be considered efficient, per se.If they are still earning very high rates of return, then the money is still being used efficiently. If the money could be better used elsewhere, then these better educated people will get a higher rate of return by investing there. Keeping the money where it is when there are better options is a poor choice, and the lower rates they will get will mean higher returns for someone else, who is investing better.
True, but the vast majority of people do not move their investments around unless something drastic occurs- I would say this is not so much a problem with education per se as it is with ignorance.
An excellent article which points out the difference between a market entrepreneur and political entrepreneur. It also explains how some of these so-called "robber barons" did a tremendous amount of good for society while inflicting no harm.
Unless you count putting their competition out of business to be "harm".
There were a lot of amazing things the robber barons did for American society both as individuals and through the businesses they created. How they handled the competition, however, usually falls under the "bad" side of things they did.
[EDIT]The article seems to be less an investigation of market entrepreneurism vs. political entrepreneurism and more of a shining up of Hill's(and other's) statue. Also, the author takes part in the annoying practice of coming up with a new or little used term to describe the negative or questionable parts of a practice or behavior they encourage re: entreprenure vs. neomercantilism. Also, it fails to give an example of a "true" robber baron beyond people involved in the two oil companies they already dislike due to their government backing. While the condemnation of the idea of predatory pricing is interesting, it ignores the aspects of it that would be a positive for the organization participating it, simply dismissing the activity on the whole. It's not exactly a horrid piece, but the slant is noticeable.
I have, however, said from the beginning that government should exist to protect property rights. If I can use your property without reprisal, then property rights are effectively meaningless. Free markets require property rights, and a system is needed to enforce property rights, government being the best equipped.
I disagree. I believe that property rights are better enforced through private enterprise, and that the government isn't any less efficient or subject to corruption in the realm of coercion to protect property than it is in any other realm.
Sigil already brought up property rights, but Estergum brought up an important point, I think - collectively assigning something to a group isn't a property rights issue anymore, it is a government issue.
So corporations can't own property?
Assuming there is some shareholding going on then it is a group of people that own the corporations assets and control their use.
I have, however, said from the beginning that government should exist to protect property rights. If I can use your property without reprisal, then property rights are effectively meaningless. Free markets require property rights, and a system is needed to enforce property rights, government being the best equipped.
I think you're missing what properties rights are about (as I was taught anyways).
Your "property rights" is about the "right" to exchange it for something else. Its not about rights of use.You have the property right to sell your car, exchange it for some other resource. You don't have the right to drive at 200mph or on the footpath.
Regulations are mostly about the rights of use not the rights of exchange, though those regulations do exist as well.
Similarly you state "government's only function is to enforce rights of life, liberty, and property" as an apriori fact.
Personal I don't agree with this definition of government. I don't have one that's strong and consistent but my fuzzy one is more about people that property. Something along the lines of enhancing the happiness of its citizens.
Don't remember saying happiness is free. Neither is life or liberty or property.
The main thrust was (meant to be) that the defined role of government is not a self evident axiom. Though to be fair it was defined in the first post.
Why is the governmental role of "life, liberty and property"? Because it helps "free markets"?
Why are free markets so desirable? Is there a better way? How does one measure or define "better".
Under what conditions do particular structures work "better", do some structures support more numerous definitions of "better" than others?
Would a free market be "better" during a real war?
To this I always have to ask... If this American capitalism is so unfair and oppressive to the worker, especially the unskilled worker, why do we have millions of illegal immigrants here? They see that they have a better chance here than anywhere.The concept evolved to mean something like people that isn't very intelligent or have got a poor education, prolly unskilled workers or people that is easy to manipulate.
The bit about capitalism and stupid people is just silly.
Because Australia is harder to get to... We have many illegal immigrants trying to come here but they have to cross through Jungle, then several other countries that aren't nice to refugees, and finally 100's of kilometres of ocean to get here. Nothing special about the US you just have a land border that's easy to get across and Europe has exactly the same problem.
How about this both the US government and US companies in the name of competition have persued tactics and policies that eliminate competition in Latin American countries. Which was not too difficult as most countries were still in the death-throws of highly inefficient colonial rule.
The destruction of the industrial base of theses countries has lead to widespread poverty, ergo it is a very capitalistic idea for people to go find jobs where the jobs are and its very capitalistic of people to out compete others for those jobs.
The illegal immigrants to America are practising capitalism in its purest form. If you are too fat,lazy and snobby to do a job then the person most willing to do it will take it from you.
So when the 2-3rd generation of people whose parents were illegal immigrants start taking the higher paying jobs because their parents worked themselves to the bone so that their kids can get a good education and live a better life you can thank capitalism.
Those kids are going to have a hunger for the better life that millions in the pampered are too lazy to have. You can thank capitalism.
Think about it if a company can employ an illegal immigrant for $10 an hour compared to you for $25 an hour who are they going to employ.
For example, Central Pacific Railroad's owner Leland Stanford was a former governor and senator of California, and used political connections to make it illegal to compete with CP.
Which shows that the wrong regulations lead to problematic results -- a statement with which, I hope, no one disagrees. On the flip side, in the absence of any regulation against conflicts of interest between government and business (including bribery or outright office holding), of course every wise business owner would put an official in his or her pocket.
The point is, bad regulations are indeed bad. Any number of examples of that can easily be cited. I should also point out again that I believe MOST regulation is more of a hindrance than a help. However, that doesn't automatically somehow mean that ALL regulation of ANY KIND is bad. Demonstrating an absolute claim of that magnitude will require a lot more than a couple of anecdotes. In brief, I believe in a minimal-regulation, not a regulation-free, economy.
It also explains how some of these so-called "robber barons" did a tremendous amount of good for society while inflicting no harm.
Again, as long as we don't imagine the word "some" to mean "all" (or even "most"), I don't think anyone will disagree.
Oh come now. Noone from the government was putting a gun to Stanford's head making him do those things. The government stepped in and evened the playing field. Certainly, this was to Hill's disadvantage- and he should be lauded for his responsiblity- but to say that the Robber Barons are the government's handiwork is similar to saying that a store owner forced a robber to hold up his store because he indirectly caused the robber's business to fail. What Hill did doesn't make what Stanford did okay.
People respond to incentives. When you offer the wrong incentives, you encourage people to take wrong actions. Sure, some honest few may not go for it, but most will.
James J. Hill was not living in 2010. The economic, educational, and entreprenural systems were COMPLETELY different in his time, to the point that it is truly unfair to compare to the two.
So you are saying the more laissez-faire systems that existed back then made it easier for the poor to become prosperous than the more mixed economy we have today?
I would say this varies wildly depending on what job you get. The degree simply gets your foot in the door, in my experience. From there, it's entirely up to you. Just because something is free doesn't mean it's worthless- if you don't believe me, see how long you can hold your breath.
I turn back to property rights in this one, if the air was truly free then pollution shouldn't be an issue. Since pollution is an issue, then we can conclude that there is a limited amount of quality air, and as with any scarce good - it has value.
Maybe we're having two different conversations here. My comments above were aimed at the idea of someone being rich and/or wealthy, not necessarily the standard of living they are at. Those are two different things, and we may be going in two different directions. In terms of standard of living, many other countries are quite compatible with the US, something that is often forgotten in standard of living arguments- it's not that we're at the top of the heap in that respect- others are capable of living comfortably as well.
How do you define "rich" or "wealthy" then? Is it a quantity of assets? In that case the government could make everyone rich by just printing oodles of money and giving it away. Or we could define it in relative terms, in which case rich just means having more than someone else. In any case, there are definite links between standard of living and wealth, which is why many people want to be rich.
Education is extremely, extremely important, however it has little to do with my statement. Tracking economic trends is a job in and of itself, and if you aren't working in the field or have the capital to hire the services of someone who does, then you really aren't going to make the kind of money that I was thinking of when I made that statement. Sure- anyone can look at wall street data and learn to interpret it and even attempt to make predictions, but when you get into the amounts of money that make people's palms itch(five digits at least), you are usually talking about people who either do this for a living or are financially set and so have a lot of time on their hands to spend learning the "game". Not to put words in your mouth, but your last statement sounds a lot like "it's the poor's fault they're poor".
To some degree, I do say this. While I certainly recognize cases of misfortune or parental affects, in general I think social mobility is certainly possible with work. Investment doesn't just mean the stock market - it means taking what assets you have and improving them to get better returns.
Socio-economic mobility from the top looking down seems a lot easier than when you're on the bottom looking up. It's not easy to balance a portfolio when you're working 8+ hours a day. Not that there aren't people that do it, but there aren't nearly so many as to make your statement gospel.
This actually made me laugh. I'm sorry, I'm not trying to be antagonistic, and you weren't to know. See, my parents lived a lower middle class lifestyle, financed heavily through debt. They didn't have much in the end to give me. I have spent 12 years in the labor force now, and only in one year have I made more than $20k - and not by much. I didn't own a car until about 4 or 5 years ago. I had to drop out of school for a number of years because I couldn't afford it. I have invested in the stock market, but no more than $500 and I lost money. I look to cut costs where I can and live below my means. I'm living off of student loans now, but I could have kept working and graduated without any school loans to pay off. I still don't have comprehensive health insurance. (I think I get some through the school, but I'm not even sure.) I'm not at the lowest levels, but I am on the bottom looking up, and because I chose to invest in learning even when I wasn't in school, I am finding social mobility fairly unrestrictive, with effort.
What industries are you referring to?
I'll do more research later, but Disney and Home Depot spring to mind as examples.
True, but the vast majority of people do not move their investments around unless something drastic occurs- I would say this is not so much a problem with education per se as it is with ignorance.
Wait, what exactly are we talking about here? These people are investing their money - ie, letting someone else use it. While I can see the appeal to sit in a giant nest made of money, or swim Scrooge style through a pool of it, that earns no returns. Even if they remove it from circulation in this way, that means the decreased supply of currency causes price levels to drop, affecting other parts of the market, leading to greater returns for others. No matter what they do with it, the most efficient investments end up getting more capital and inefficient investments lose value.
NPC Dave, congratulations on finding the very Mises article I got my sources from. ;)
There were a lot of amazing things the robber barons did for American society both as individuals and through the businesses they created. How they handled the competition, however, usually falls under the "bad" side of things they did.
[EDIT]The article seems to be less an investigation of market entrepreneurism vs. political entrepreneurism and more of a shining up of Hill's(and other's) statue. Also, the author takes part in the annoying practice of coming up with a new or little used term to describe the negative or questionable parts of a practice or behavior they encourage re: entreprenure vs. neomercantilism. Also, it fails to give an example of a "true" robber baron beyond people involved in the two oil companies they already dislike due to their government backing. While the condemnation of the idea of predatory pricing is interesting, it ignores the aspects of it that would be a positive for the organization participating it, simply dismissing the activity on the whole. It's not exactly a horrid piece, but the slant is noticeable.
To be fair, the article is actually part of a larger book. It is generally held at Mises that predatory pricing isn't a problem, and the article doesn't bother to deal with it because of this. I'll try to find an article on that issue, or explain it myself, if you would like, but essentially it amounts to long term vs. short term and scope of conflict. IE, no company can drive out competitors everywhere at all times, so in the long run predatory pricing doesn't help.
I disagree. I believe that property rights are better enforced through private enterprise, and that the government isn't any less efficient or subject to corruption in the realm of coercion to protect property than it is in any other realm.
Well, there are reasons I am a minarchist, rather than an anarchocapitalist. You may be right that private security would be better than government for enforcing property rights, but I do think government is needed to establish and maintain them.
So corporations can't own property?
Assuming there is some shareholding going on then it is a group of people that own the corporations assets and control their use.
Point to you. However, then it would be a corporation that owned the river, and the shareholders owning the corporation. Shareholders don't directly own a corporation's assets. But you are right, not every instance of collective ownership requires government.
I think you're missing what properties rights are about (as I was taught anyways).
Your "property rights" is about the "right" to exchange it for something else. Its not about rights of use.
You have the property right to sell your car, exchange it for some other resource. You don't have the right to drive at 200mph or on the footpath.
Regulations are mostly about the rights of use not the rights of exchange, though those regulations do exist as well.
That's exactly opposite what I was taught. I would say that the reason you can't drive at 200mph or on footpaths is because the owner of the road or footpath exercises their properrty rights to limit your use of their property. If I own a private road in my backyard, I certainly can drive on it at 200mph. Either you own something or you don't - if you own it, you can use it in any way you choose. If you don't own it, then you may not use it at all unless you come to an agreement with the owner, who may set stipulations on how you use it.
Don't remember saying happiness is free. Neither is life or liberty or property.
You are right. However, there is a huge difference between a government that tries to give you happiness and one that leaves you the freedom to pursue happiness. The second can apply to everyone, the first must necessarily be taken from some to give to others. But you do have a point that not everyone has the same view of what government's function is. I derive mine from the idea that freedom is most important, you seem (to my understanding) to derive yours from the idea that happiness is most important.
The 8th Dwarf, I agree with everything you just said. Immigrants try to get to the best possible location for the least effort. I don't know much about the Austrailian system, but the Index of Economic Freedom places it 3rd, ahead of the United States, so it makes sense to me that people would try to go there. As for Latin American nations... they have poorly defined property rights, and their governments are often corrupt. Also makes sense that American companies would have easily caused problems there.
Demonstrating an absolute claim of that magnitude will require a lot more than a couple of anecdotes. In brief, I believe in a minimal-regulation, not a regulation-free, economy.
I think we are both guilty here - there is no system of arguments that can be placed against your position that you can't just respond with, "Well, those weren't the right regulation, but some set of regulations are needed." Even if every example of regulations I come up with results in unintended consequences that make things worse, you can hold this argument. However, I CAN say that true free markets are rarely tried, so you have even less examples of free markets NOT working than I do of regulations not working.
The 8th Dwarf, I agree with everything you just said. Immigrants try to get to the best possible location for the least effort. I don't know much about the Austrailian system, but the Index of Economic Freedom places it 3rd, ahead of the United States, so it makes sense to me that people would try to go there. As for Latin American nations...
Australia is a Constitutional Federal Monarchy. The current government is a centre right Socialist government in coalition with the Greens and two rural right independents. The opposition party the "Liberal" party (which despite its name is a right wing conservative party) is based on the liberalisation of Trade and the economy.
Dont get me wrong I admire the refugees that make it to Australia, If you make it across desserts, jungles, hostile countries, through the pirate infested waters of the Indonesian archipelago to get Australia, then they are the kind of resourceful tenacious people that this country needs.
You are still at Uni right... The world is far different place when you are trying to look after a family and keep your job.
The problem with formula, theory and schools of thought is that they can not take every possibility into account and they do not evolve fast enough to keep up with changes in it.
This is my favourite Douglas Adams quote and you can apply it economics
"There is a theory which states that if ever anyone discovers exactly what the Universe is for and why it is here, it will instantly disappear and be replaced by something even more bizarre and inexplicable.
There is another theory which states that this has already happened."
they have poorly defined property rights, and their governments are often corrupt. Also makes sense that American companies would have easily caused problems there.
It makes sense from a capitalist point of view... eliminate the competition achieve monopoly and exploit as many resources as possible before your rivals do.
Capitalism is wasteful and inefficient and can only be sustained by creating new markets for the resources being exploited. That is why we have goods and services that we don't need and more choice than is useful.
Either you own something or you don't - if you own it, you can use it in any way you choose. If you don't own it, then you may not use it at all unless you come to an agreement with the owner, who may set stipulations on how you use it.
There's another example from you of what I see as a false dichotomy. Is there no possibility joint ownership in any way, under any system? Is there no possible situation in which using joint property "any way you choose" might be within your legal rights, but lead to a worse end than showing some restraint? (I recall that someone mentioned the Tragedy of the Commons earlier, which you attempted to brush off, more or less, by denying the possibility of joint ownership. For this to be valid, you'd need to somehow prove that joint ownership cannot exist.)
I think we are both guilty here - there is no system of arguments that can be placed against your position that you can't just respond with, "Well, those weren't the right regulation, but some set of regulations are needed."
Your logic is missing a step, though -- to show that an "all" insistence is flawed, someone need only indicate one (1) counterexample: in this case, one regulation in the history of trade that helped more than it hurt. Of course, if in your mind you've decided a priori that the definition of "hurt" is "to apply any restriction to whatsoever," then we're talking past one another, so a mutually-agreeable definition is needed first. Maybe something along the lines of net wealth gain or loss for everyone involved, so you can hold up the one guy making $15,000,000 as a "better" result than 10 people making $1,000,000 each -- but by the same token, 1,000 people making $20,000 each is better still.
However, I CAN say that true free markets are rarely tried, so you have even less examples of free markets NOT working than I do of regulations not working.
I disagree. There are defacto free markets over large parts of the world. Half a dozen nations in Sub Sahara Africa have such weak governments that they barely control anything outside of their capital. There are at least half a dozen nations in Asia that are similar. Afghanistan, at least when some foreign major power is not in the midst of trying to control it is a good example.
One of the defining features of nation states that have modernized is their ability to impose regulations that will actually be followed to the various corners of their nation state. You mention 'corruption' in your post in regards to Central and South America but don't delve into what corruption is or where it comes from.
Corruption usually stems from the inability of the central authority to effectively impose its will on the state or the state apparatus. Without a powerful central government people don't normally turn to a free market for solutions to their needs. To many are far to poor for that. Instead tribalism is the result - you look to your family and to an interconnected web of personal alliances in order to meet your needs. For successful members that means making yourself the chief of police and making it so that your brothers are all on the police force and then you make money by shaking down groups not as powerful as you. This corruption is the free market in action.
This is the problem with any idea of hiring security purely on a free market basis. You don't get many that provide that security purely as a job - A few mercenaries for the wealthy but most instead turn for their security to their 'tribe'. The real problem with private security in this instance is that...without some centrally controlled government owned retribution force your security is in real danger if you have things worth having and I believe that my tribe is strong enough to defeat your security.
We see this in any modern city with extensive slums where the police fear to tread. These areas don't have individuals that are ranked by money...they are instead ranked by power and those on the top of the heap in terms of power then get the money. You see innumerable examples of that in modern Iraq where the entirety of the societies old guard have just been replaced wholesale and the old underclass (the shi'ites) are, by and large, the only ones allowed to make a grab for power as they are not tainted by the old regime. Here again we don't really see a situation where money decides power but usually the opposite, power decides who gets to be in what slots in society and those with the best slots get money as a side benefit.
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After someone started to threadjack this thread I decided to put this here so as to leave the original thread be. This topic is serious, but that doesn't mean the talk must be. I would, however, like to keep it in good form - a joke's a joke, but you can take it too far.
I am strongly for free market economics. So when someone says that capitalism can't work without stupid people, I challenge it!
My qualifications: I'm in my senior year of getting a degree in Finance, with an Economics concentration.
My contention: capitalism works just fine, and does not require stupidity to function.Definitions: When I say capitalism, I mean a free economy where government's only function is to enforce rights of life, liberty, and property. Contrast this to a command economy where government controls the means of production and distribution of goods. A mixed economy has some elements of government control and regulation, while other elements are privatized.
That right there is a failed system that must use the government to force the haves to sell or surrender resources that they wont sell at any price. My great uncle and Aunt were forcibly evicted from their home in Prince Rupert because the Local Council had a friend in Real estate who wanted their block of land and they wouldnt sell. Their conclusion was that these old people didnt have the right to their (now valuably situated home) because they were not making sufficient economic use of it. They were evicted into an old folks home.
System failed. State removed underexploited assets from owner with minimal or no recompense. So you will not be allowed to demand the true market value of anything you have a monopoly if a Corporation has any Political Influence.
Freehold DM wrote:
Oh come now. Noone from the government was putting a gun to Stanford's head making him do those things. The government stepped in and evened the playing field. Certainly, this was to Hill's disadvantage- and he should be lauded for his responsiblity- but to say that the Robber Barons are the government's handiwork is similar to saying that a store owner forced a robber to hold up his store because he indirectly caused the robber's business to fail. What Hill did doesn't make what Stanford did okay.People respond to incentives. When you offer the wrong incentives, you encourage people to take wrong actions. Sure, some honest few may not go for it, but most will.
An ugly and unfortunate truth. Still, we cannot hand over our society to the lazy- we must continue to set high standards, although not unrealistically so. I will study this man Hill's life and see what else he has done. Still, no excuses for Stanford's actions.
[QUOTE="Mentioned Above"}Freehold DM wrote:
James J. Hill was not living in 2010. The economic, educational, and entreprenural systems were COMPLETELY different in his time, to the point that it is truly unfair to compare to the two.
So you are saying the more laissez-faire systems that existed back then made it easier for the poor to become prosperous than the more mixed economy we have today?
Lots of things were easier back then. It was easier to die of diptheria for one. It was also relatively easier to live a life of crime. Don't halcyon up the old days- not that I'm saying you are doing that, but statements like the one you made above are often head in that direction.
[QUOTE-"Mentioned Above"}Freehold DM wrote:
I would say this varies wildly depending on what job you get. The degree simply gets your foot in the door, in my experience. From there, it's entirely up to you. Just because something is free doesn't mean it's worthless- if you don't believe me, see how long you can hold your breath.
I turn back to property rights in this one, if the air was truly free then pollution shouldn't be an issue. Since pollution is an issue, then we can conclude that there is a limited amount of quality air, and as with any scarce good - it has value.
I think we're having two different conversations on this tip. Air IS free, but pollution is an issue because that is something someone else is doing to a free resource. I have the right to live my life as I choose- if someone comes up to me and attempts to put a handspan of steel in my gut, they are indeed infringing upon my right to do so, but that doesn't link back to property rights in anyway.
Freehold DM wrote:
Maybe we're having two different conversations here. My comments above were aimed at the idea of someone being rich and/or wealthy, not necessarily the standard of living they are at. Those are two different things, and we may be going in two different directions. In terms of standard of living, many other countries are quite compatible with the US, something that is often forgotten in standard of living arguments- it's not that we're at the top of the heap in that respect- others are capable of living comfortably as well.How do you define "rich" or "wealthy" then? Is it a quantity of assets? In that case the government could make everyone rich by just printing oodles of money and giving it away. Or we could define it in relative terms, in which case rich just means having more than someone else. In any case, there are definite links between standard of living and wealth, which is why many people want to be rich.
In terms of being rich or wealthy, your statement is unfair- if the government did that, the money wouldn't be worth the paper it's printed on. We all know this, and the government really isn't doing that, per se, despite rhteoric coming from opposing camps. Still, I didn't define what I meant by rich or wealthy, so maybe I'm just snapping at an errant breeze. To use your definitions, this means standard of living is something that people are always going to want more of, and while yes, America is close to the top of the heap, maybe people should be emulating that Saudi oil merchant who is probably still the richest individual in the world.
Freehold DM wrote:
Education is extremely, extremely important, however it has little to do with my statement. Tracking economic trends is a job in and of itself, and if you aren't working in the field or have the capital to hire the services of someone who does, then you really aren't going to make the kind of money that I was thinking of when I made that statement. Sure- anyone can look at wall street data and learn to interpret it and even attempt to make predictions, but when you get into the amounts of money that make people's palms itch(five digits at least), you are usually talking about people who either do this for a living or are financially set and so have a lot of time on their hands to spend learning the "game". Not to put words in your mouth, but your last statement sounds a lot like "it's the poor's fault they're poor".To some degree, I do say this. While I certainly recognize cases of misfortune or parental affects, in general I think social mobility is certainly possible with work. Investment doesn't just mean the stock market - it means taking what assets you have and improving them to get better returns.
I would argue that you are not giving cases of misfortune or parental effects enough weight and giving the ideal of social mobility through work far too much credit. I think that's all we can say about that.
Freehold DM wrote:
Socio-economic mobility from the top looking down seems a lot easier than when you're on the bottom looking up. It's not easy to balance a portfolio when you're working 8+ hours a day. Not that there aren't people that do it, but there aren't nearly so many as to make your statement gospel.This actually made me laugh. I'm sorry, I'm not trying to be antagonistic, and you weren't to know. See, my parents lived a lower middle class lifestyle, financed heavily through debt. They didn't have much in the end to give me. I have spent 12 years in the labor force now, and only in one year have I made more than $20k - and not by much. I didn't own a car until about 4 or 5 years ago. I had to drop out of school for a number of years because I couldn't afford it. I have invested in the stock market, but no more than $500 and I lost money. I look to cut costs where I can and live below my means. I'm living off of student loans now, but I could have kept working and graduated without any school loans to pay off. I still don't have comprehensive health insurance. (I think I get some through the school, but I'm not even sure.) I'm not at the lowest levels, but I am on the bottom looking up, and because I chose to invest in learning even when I wasn't in school, I am finding social mobility fairly unrestrictive, with effort.
An optimistic attitude is a necessity. However, if by your own admission you know it's not as easy as it sounds, then why didn't you keep working and graduate without any loans? Your story sounds like its an interesting one, and I would know more.
Freehold DM wrote:
What industries are you referring to?I'll do more research later, but Disney and Home Depot spring to mind as examples.
Disney. Seriously? Disney eats smaller animation companies for breakfast. I find their practices abhorrent. I would say they are a terrible example.
Freehold DM wrote:
True, but the vast majority of people do not move their investments around unless something drastic occurs- I would say this is not so much a problem with education per se as it is with ignorance.Wait, what exactly are we talking about here? These people are investing their money - ie, letting someone else use it. While I can see the appeal to sit in a giant nest made of money, or swim Scrooge style through a pool of it, that earns no returns. Even if they remove it from circulation in this way, that means the decreased supply of currency causes price levels to drop, affecting other parts of the market, leading to greater returns for others. No matter what they do with it, the most efficient investments end up getting more capital and inefficient investments lose value.
Mm...money baths. If I make my first million before you, you're coming over for a quick dip. We'll make cash angels.
Maybe I'm we're having two different conversations here. You're talking about efficiency, I'm talking about status quo still providing profits, which it can and often does. Most people would rather not rock the boat, which I still attest to ignorance over anything else.
NPC Dave, congratulations on finding the very Mises article I got my sources from. ;)
Freehold DM wrote:
There were a lot of amazing things the robber barons did for American society both as individuals and through the businesses they created. How they handled the competition, however, usually falls under the "bad" side of things they did.[EDIT]The article seems to be less an investigation of market entrepreneurism vs. political entrepreneurism and more of a shining up of Hill's(and other's) statue. Also, the author takes part in the annoying practice of coming up with a new or little used term to describe the negative or questionable parts of a practice or behavior they encourage re: entreprenure vs. neomercantilism. Also, it fails to give an example of a "true" robber baron beyond people involved in the two oil companies they already dislike due to their government backing. While the condemnation of the idea of predatory pricing is interesting, it ignores the aspects of it that would be a positive for the organization participating it, simply dismissing the activity on the whole. It's not exactly a horrid piece, but the slant is noticeable.
To be fair, the article is actually part of a larger book. It is generally held at Mises that predatory pricing isn't a problem, and the article doesn't bother to deal with it because of this. I'll try to find an article on that issue, or explain it myself, if you would like, but essentially it amounts to long term vs. short term and scope of conflict. IE, no company can drive out competitors everywhere at all times, so in the long run predatory pricing doesn't help.
I agree with the lattermost statement. However, nothing stops them from trying to in the name of competition. Short term gains often wipe out long-term concerns.
One of the central issues with having a big government is that the government has the violence monopoly. In concrete terms, this means that the government can always force you to a position where they gain, not you. While you can sue a corporation and (theoretically) win, your struggles with the state will only give you something if they want it to happen.
What we see today is corporativism, where big companies that should compete with one another freely, giving the rewards of this to the consumers, are now strongly allied to the government who is making up new laws to suit the companies and giving sensitive personal information to various companies.
Yes, a free market is a good thing, but there is no free market. It's distorted, the incentives are all wrong, lies and corruption are widespread, the privileges of secrecy are horribly abused, and so on. If this situation continues, you'll see a further swelling of the state and its reach into all our lives, and a socialist agenda will have been enacted without anyone really voting for it.
Plato stated it best: "The state's first job is to do what's good for the state."
I see your economics concentration, and raise you a minor in economics. :)
I think capitalism can and does work. I don't think laissez-faire capitalism is a good idea, however, for various reasons. Briefly:
1. Imperfect information. See prisoner's dilemma.
2. Negative externalities (pollution, etc), aka the tragedy of the commons.
3. Poor corporate accountability.
4. Strong incentives exist to maximize short-term profits at the expense of long-term prosperity.
5. Unfettered inheritance causes capital to accumulate inefficently....and those are just off the top of my head.
Admittedly, the last few are probably specific to the modern United States economy, but the first few are unavoidable, at least as far as I know.
The bit about capitalism and stupid people is just silly.
I am doing this from memory with time contraints, this is also a only tangentally related to my area of study, so hopefully i'll get it all right. if not, my appologies.
Bugleyman has one of the most important reason for why laissez-faire doesn't work in the real world, that being the absence of Perfect information.
Two other pillars exist within the theoretical laissez-faire economy which allows it to function mathematically but not in reality.
The first is rational behaviour. If you wish to win in the prisoner's dilemma, you always have to behave rationally and self interestedly. If every one does, the laissez-faire mode is stable, however, if people behave inconsistantly and irrationally, such as being altruistic, as humans are want to be, then the system is horribly unstable.
The second is an environment in which an economy can grow infinately, with infinite resources.
One of the central issues with having a big government is that the government has the violence monopoly. In concrete terms, this means that the government can always force you to a position where they gain, not you. While you can sue a corporation and (theoretically) win, your struggles with the state will only give you something if they want it to happen.
What we see today is corporativism, where big companies that should compete with one another freely, giving the rewards of this to the consumers, are now strongly allied to the government who is making up new laws to suit the companies and giving sensitive personal information to various companies.
Yes, a free market is a good thing, but there is no free market. It's distorted, the incentives are all wrong, lies and corruption are widespread, the privileges of secrecy are horribly abused, and so on. If this situation continues, you'll see a further swelling of the state and its reach into all our lives, and a socialist agenda will have been enacted without anyone really voting for it.
Plato stated it best: "The state's first job is to do what's good for the state."
Interesting. Would you say a free market CAN exist or is it solely based in theory as reality just doesn't allow for it?
One of the central issues with having a big government is that the government has the violence monopoly. In concrete terms, this means that the government can always force you to a position where they gain, not you. While you can sue a corporation and (theoretically) win, your struggles with the state will only give you something if they want it to happen.
Who is this 'they' character? You imply that the government is a unified whole that acts with a single agenda and is prepared to back that agenda up by turning the men and women in uniform on their fellow citizens to enforce their will with extreme prejudice.
What we see today is corporativism, where big companies that should compete with one another freely, giving the rewards of this to the consumers, are now strongly allied to the government who is making up new laws to suit the companies and giving sensitive personal information to various companies.
Well its certainly in the nature of corporations to do what they can to make profits. But corporations don't act with one voice either. Beyond that in modern democracies governments don't derive their power from Corporations, they derive it from the people.
Plato stated it best: "The state's first job is to do what's good for the state."
Plati thinks only members of the Ivory Tower should rule...and lo and behold...he's a member of the Ivory Tower.
Who is this 'they' character?One of the central issues with having a big government is that the government has the violence monopoly. In concrete terms, this means that the government can always force you to a position where they gain, not you. While you can sue a corporation and (theoretically) win, your struggles with the state will only give you something if they want it to happen.
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Interesting. Would you say a free market CAN exist or is it solely based in theory as reality just doesn't allow for it?One of the central issues with having a big government is that the government has the violence monopoly. In concrete terms, this means that the government can always force you to a position where they gain, not you. While you can sue a corporation and (theoretically) win, your struggles with the state will only give you something if they want it to happen.
What we see today is corporativism, where big companies that should compete with one another freely, giving the rewards of this to the consumers, are now strongly allied to the government who is making up new laws to suit the companies and giving sensitive personal information to various companies.
Yes, a free market is a good thing, but there is no free market. It's distorted, the incentives are all wrong, lies and corruption are widespread, the privileges of secrecy are horribly abused, and so on. If this situation continues, you'll see a further swelling of the state and its reach into all our lives, and a socialist agenda will have been enacted without anyone really voting for it.
Plato stated it best: "The state's first job is to do what's good for the state."
Communism = government ownership of capital and the means of production (theoretically held in trust for the people, in reality just boot at the throat of the people).
Capitalism (according to Marx) = collusion between government and business (theoretically to protect a "free market", in reality just another boot at the throat of the people).
Capitalism =/= free market economics.
As to the idea that a free market doesn't work because of the lack of "perfect information", pshaw. If "perfect information" were a criterion for anything, nothing would work. The idea in a free market is for people to act proactively and find out what they can about the business that claims to have what they need. Caveat emptor and all that. Government's duty in the arena is to set some basic ground rules and regulate fraud and outright theft, both of which are detrimental to a free market system. And free market doesn't mean "unregulated", it means parties are free to trade goods and ideas in an open marketplace. Free market =/= economic anarchy (which is what exists in third world counties. No one in their right minds would say they are a "free market").
The Robber Barons were only able to do what they did with heavy reliance on the power of the government to protect and advance their interests. I.e. Capitalism. The goings on of the late 19th Century were most definitely not an example of a free market. Probably the closest we came to a free market was under Teddy Roosevelt, when he withdrew the support of the government from business and pushed legislation to force businesses to play fair. That lasted until 1913, when the pendulum began its swing towards the other extreme (sandwiched between was Taft's term, less said the better, imo).
Government's duty in the arena is to set some basic ground rules and regulate fraud and outright theft, both of which are detrimental to a free market system. And free market doesn't mean "unregulated", it means parties are free to trade goods and ideas in an open marketplace. Free market =/= economic anarchy (which is what exists in third world counties. No one in their right minds would say they are a "free market").
Thank you -- in contrast to some of the others proposed (or imagined), these seem to be definitions that are susceptable to working reality. By your definitions (in contrast to the OP's), I'm 100% in favor of what you call a "free market." Loved TR.
Government's duty in the arena is to set some basic ground rules and regulate fraud and outright theft, both of which are detrimental to a free market system. And free market doesn't mean "unregulated", it means parties are free to trade goods and ideas in an open marketplace. Free market =/= economic anarchy (which is what exists in third world counties. No one in their right minds would say they are a "free market").Thank you -- in contrast to some of the others proposed (or imagined), these seem to be definitions that are susceptable to working reality. By your definitions (in contrast to the OP's), I'm 100% in favor of what you call a "free market." Loved TR.
See! I can agree with both Kirth AND Derek! WITHOUT the earth colliding with the sun!
As to the idea that a free market doesn't work because of the lack of "perfect information", pshaw. If "perfect information" were a criterion for anything, nothing would work. The idea in a free market is for people to act proactively and find out what they can about the business that claims to have what they need. Caveat emptor and all that. Government's duty in the arena is to set some basic ground rules and regulate fraud and outright theft, both of which are detrimental to a free market system. And free market doesn't mean "unregulated", it means parties are free to trade goods and ideas in an open marketplace. Free market =/= economic anarchy (which is what exists in third world counties. No one in their right minds would say they are a "free market").
Contrary to your apparent belief, writing "pshaw" does not alter reality. :)
No one said the market doesn't work in the absence of perfect information -- what was said is that it doesn't work perfectly. In the vast majority of cases, information will be less than perfect, and so market participants (and the market as a whole) will behave less than perfectly. Ergo regulation ("basic ground rules") may be justified. Debating whether such regulation is needed is reasonable; dismissing game theory out of hand is not.
c) Production of unskilled people
Good education isn't free, and many of those who call themselves capitalists wouldn't make basic education free.
Since lower class families can't pay for good education, the system will produce a number of unskilled workers.
I have heard something about letting companies pay that education, if they want to, imho that's ridiculous. Many companies could do it right...
Primary and Secondary Education is free in Australia - Tertiary education used to be free. Unfortunately the generation (the bastards) that got free University or Trade education abolished it and those of us that go/ have gone to Uni have to pay for it up front or as an additional percentage on our Tax. I have just finished paying mine off and I finished Uni in 1995.
The only problem with the free Tertiary education was that we ended up with an over abundance of lawyers and economists and not enough electricians and plumbers. In Australia tradesmen earn as much as lawyers and economists.
The only problem with the free Tertiary education was that we ended up with an over abundance of lawyers and economists and not enough electricians and plumbers. In Australia tradesmen earn as much as lawyers and economists.
Does that mean I could earn a trade at a cheap school here in the States, and then profit by moving to Australia? Why haven't lots of American tradesmen done this?
The only problem with the free Tertiary education was that we ended up with an over abundance of lawyers and economists and not enough electricians and plumbers. In Australia tradesmen earn as much as lawyers and economists.
We get that in Canada as well and its been the case for at least a decade and shows no real sign of stopping. The thing that drives it, IMO, is that, while the average trades person makes about as much as the average lawyer or economist the trades person tops out far below the lawyer or economist. I know a lot of trades people making $50,000 and you can get to that income bracket reasonably young but almost no trades people make 6 figures while the better off economists and lawyers easily clear six figures and the few at the top of the heap get into seven figures.
Does that mean I could earn a trade at a cheap school here in the States, and then profit by moving to Australia? Why haven't lots of American tradesmen done this?The only problem with the free Tertiary education was that we ended up with an over abundance of lawyers and economists and not enough electricians and plumbers. In Australia tradesmen earn as much as lawyers and economists.
If your something like a skilled electrician I bet you'd be able to move north to Canada with no trouble finding work. In fact I'm a little surprised that America has an excess of such skilled labour since I'd expect the same factors causing a shortage and a 'greying' of skilled trades people in Australia and Canada would apply to the US as well...though maybe not to the same degree.