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The invisible hand out

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Posts

  • Psycho Internet HawkPsycho Internet Hawk Registered User regular
    edited July 2008
    Yar, I think you're technically correct in that stuff like the CRA made it easier and more reasonable for banks to make money off of terrible, insecure loans, but I wouldn't say that neccesarily makes them responsible for the idea that the housing market was an unstoppable financial juggernaut, which, at least as far as I can see, was the core of the problem.

    ezek1t.jpg
  • monikermoniker Registered User regular
    edited July 2008
    Nova_C wrote: »
    Ghandi 2 wrote: »
    The problem is that they can do whatever they want with zero consequences. Large companies acting as if risk no longer matters because they know that the Fed will bail them out isn't good for anyone. They reap the rewards when it's good, we get the bill and market instability when it's bad. If we socialized them, we would also get the rewards, and maybe they wouldn't take such stupid risks anymore.

    Governments make terrible business administrators. It would be more expensive in the long run.

    The problem with a government run company is that it is subject to the whims of the politics of the entire nation. Which means a profitible government company is bad, since the government shouldn't be profiting (According to many people), losing money is bad since the government shouldn't be losing money (According to many people), market forces can't have a great effect on the prices since the people who buy your products are also the people who vote for you.

    Take a private company and then make the board of directors established by popular vote of an entire nation. That's a government company and it's just not a good idea.

    Eh, that's true for most every company until you get into areas of natural monopolies. Then the benefits of market forces don't exist and you're stuck with shitty service but not real alternative. At least you can vote the bums out. Which is why regulation of those guys is so complicated.

    It'd be interesting to see what nationalizing the infrastructure platforms which create a natural monopoly, but leaving the companies who provide the services in the marketplace would lead. Gummin't owns all the fiber and cell towers and such, but you buy your access to it via local ISP's and cell phone companies that compete with each other. Rather than only choosing between AT&T, Verizon, or Comcast.

    tea-1.jpg
  • YarYar Registered User regular
    edited July 2008
    Yar, I think you're technically correct in that stuff like the CRA made it easier and more reasonable for banks to make money off of terrible, insecure loans, but I wouldn't say that neccesarily makes them responsible for the idea that the housing market was an unstoppable financial juggernaut, which, at least as far as I can see, was the core of the problem.
    There are a lot of wordy words in this thread so far, but yes, I agree. The housing boom juggernaut is a big factor here, and that was also largely spurned on via government and Federal Bank policy.

  • PirateJonPirateJon Registered User regular
    edited July 2008
    Nova_C wrote: »
    Ghandi 2 wrote: »
    The problem is that they can do whatever they want with zero consequences. Large companies acting as if risk no longer matters because they know that the Fed will bail them out isn't good for anyone. They reap the rewards when it's good, we get the bill and market instability when it's bad. If we socialized them, we would also get the rewards, and maybe they wouldn't take such stupid risks anymore.

    Governments make terrible business administrators. It would be more expensive in the long run.

    This to me is one of the key points of nationalising something. If its proper functioning is critical to our nation, profit and expense should be secondary factors. For the public sector, it sort of is, but in for-profit business you can make poor long term decisions in pursuit of short term goals and in many cases are encouraged to do this. A failing bank is one thing, a katrina or our healthcare crisis is something else.

    It's kind of sad, but for-profit and for-people seem to be mutually exclusive in business.

    all perfectionists are mediocre in their own eyes
  • YarYar Registered User regular
    edited July 2008
    I'm not going to take this into a government vs. profit debate, but I still say you need to examine and support such claims that government-run is superior to profit-motive.

  • ege02ege02 __BANNED USERS
    edited July 2008
    PirateJon wrote: »
    It's kind of sad, but for-profit and for-people seem to be mutually exclusive in business.

    Not necessarily. The problem occurs only if the business is a monopoly, and/or is a terribly managed clusterfuck (see: our healthcare system).

    Otherwise, capitalistic competition, i.e. the profit motive, minimizes inefficiency and lowers prices for the consumer.

    Medopine wrote: »
    Fuck that woman going "oh god oh no!!"

    It's nature, bitch
  • PirateJonPirateJon Registered User regular
    edited July 2008
    Yar wrote: »
    I still say you need to examine and support such claims that government-run is superior to profit-motive.

    Not superior in all cases, profit is a very strong motivator.

    As ege mentions a lot of capitalism is "minimizes inefficiency and lowers prices". Take FEMA - by lowering stocks of supplies and reducing headcount you meet those two goals. Which is ok until something like katrina when that 'inefficiency' turns into robustness.

    all perfectionists are mediocre in their own eyes
  • PicardathonPicardathon Registered User
    edited July 2008
    PirateJon wrote: »
    Yar wrote: »
    I still say you need to examine and support such claims that government-run is superior to profit-motive.

    Not superior in all cases, profit is a very strong motivator.

    As ege mentions a lot of capitalism is "minimizes inefficiency and lowers prices". Take FEMA - by lowering stocks of supplies and reducing headcount you meet those two goals. Which is ok until something like katrina when that 'inefficiency' turns into robustness.

    Right, which is why nobody intends to privatize the fire department, police department, or FEMA (unless you're a Paultard, but that's a different story entirely).
    When it comes to, say, grocery stores, the competition by several businesses allows for lower prices than if, say, the government was in charge.

  • YarYar Registered User regular
    edited July 2008
    I said I didn't want to get into this debate, but whatever. Infrastructure-type stuff that no one has a singular vested interest in doing well (like roads) or community support services in which competition would have immedate and self-defeating side effects (like law enforcement and fire departments) have proven well-suited for government control, though they also function privately in some cases as well. Most other stuff, including things that "we need" or that "are important" seem to function more poorly in the hands of government and need the motivation of competition and profit to keep them efficient and improving.

  • YarYar Registered User regular
    edited July 2008
    Doc wrote: »
    Yar wrote: »
    The government already offers you, the consumer, all kinds of bailouts, including several recent amendments to FHA secured refinance programs for subprime borrowers in danger.

    What is your take on those? I hate, hate, hate the fact that people who were being idiots and got into horrible loans that they couldn't afford are now able to refinance and get loans at sometimes a full percentage point under what I, a person with solid cash flow and good credit, could possibly hope to qualify for.
    Necro! More on this ^:

    I looked into it, and this bailout for the borrowers is quite two-faced. It's a great plan to help out specifically someone who bought more they could afford. They get a free, low-interest, guaranteed refi and can write off a good bit of depreciation. However, the downside is that the FHA gets a permanent lein on any future appreciation. If you get an FHA loan and the market improves and you sell, the government gets 100% of any value appreciation. This 100% declines over the years to 50%, where it remains in perpetuity. That means that anyone who takes this deal will owe the government at least half the profits of the biggest investment they'll make in their lives. I haven't even thought enough about that to know how I feel about it. It stablizes the market for now, but in the long term I see a ton of money going to the government that is normally used to fund college and retirement.

  • monikermoniker Registered User regular
    edited July 2008
    They say your third house is free. This'll push that number up some.

    tea-1.jpg
  • DocDoc Registered User, ClubPA regular
    edited July 2008
    After looking at the bailout package more, I like (as opposed to grudgingly accepting) at least one aspect:
    People like me who are looking at buying a house get a loan (actually a tax credit we have to pay back) of $7,500 that's repayable over 15 years at 0%.

    So that's cool.

  • PantsBPantsB Registered User regular
    edited July 2008
    PirateJon wrote: »
    a lot of capitalism is "minimizes inefficiency and lowers prices"

    This is a claim I hear a lot referring to capitalism, but to me its combining two things.

    It is beneficial in a capitalist system to make your own operation more efficient and to lower the prices you must pay. This increases your profit.

    It is not beneficial (at least not intrinsically) to increase the general efficiency of the system or to lower your own prices to below what you must.

    Profit can be defined as the differences in efficiency between what you can provide and what is 'needed' by others. Say I can do something for X units/product. A customer would require Z units to produce or otherwise obtain a product. You offer to exchange for Y units as long as Y>X and the customer accepts as long as Y<Z.

    So why would you want to increase the efficiency of the system in general if that resulted in Z coming down, or in the number of products needed came down?

    That doesn't mean capitalism isn't the best foundation for an economic system, but it also gives the invisible hand far more credit than Adam Smith did.

    11793-1.png
    Spoiler:
  • CauldCauld Registered User regular
    edited July 2008
    PantsB wrote: »
    PirateJon wrote: »
    a lot of capitalism is "minimizes inefficiency and lowers prices"

    This is a claim I hear a lot referring to capitalism, but to me its combining two things.

    It is beneficial in a capitalist system to make your own operation more efficient and to lower the prices you must pay. This increases your profit.

    It is not beneficial (at least not intrinsically) to increase the general efficiency of the system or to lower your own prices to below what you must.

    Profit can be defined as the differences in efficiency between what you can provide and what is 'needed' by others. Say I can do something for X units/product. A customer would require Z units to produce or otherwise obtain a product. You offer to exchange for Y units as long as Y>X and the customer accepts as long as Y<Z.

    So why would you want to increase the efficiency of the system in general if that resulted in Z coming down, or in the number of products needed came down?

    That doesn't mean capitalism isn't the best foundation for an economic system, but it also gives the invisible hand far more credit than Adam Smith did.


    I think the efficiency of the "system", as you put it, is merely the summation of those individual responses. And also the natural response of each individual to their 'competitors'. I think your explanation explains why an individual deal might be made. But to add another two variables, the customer C and you (the producer) B. C would only go to B if B > P (P = all producers). the competition between individual B's results in Y decreasing as each individual X either decreases or stops being part of the market.

    I think that can be summed up in the market for "technology" and is macroeconomically measured with the term "productivity", which almost always increases as economies develop.

  • PantsBPantsB Registered User regular
    edited July 2008
    Cauld wrote: »
    PantsB wrote: »
    PirateJon wrote: »
    a lot of capitalism is "minimizes inefficiency and lowers prices"

    This is a claim I hear a lot referring to capitalism, but to me its combining two things.

    It is beneficial in a capitalist system to make your own operation more efficient and to lower the prices you must pay. This increases your profit.

    It is not beneficial (at least not intrinsically) to increase the general efficiency of the system or to lower your own prices to below what you must.

    Profit can be defined as the differences in efficiency between what you can provide and what is 'needed' by others. Say I can do something for X units/product. A customer would require Z units to produce or otherwise obtain a product. You offer to exchange for Y units as long as Y>X and the customer accepts as long as Y<Z.

    So why would you want to increase the efficiency of the system in general if that resulted in Z coming down, or in the number of products needed came down?

    That doesn't mean capitalism isn't the best foundation for an economic system, but it also gives the invisible hand far more credit than Adam Smith did.


    I think the efficiency of the "system", as you put it, is merely the summation of those individual responses. And also the natural response of each individual to their 'competitors'. I think your explanation explains why an individual deal might be made. But to add another two variables, the customer C and you (the producer) B. C would only go to B if B > P (P = all producers). the competition between individual B's results in Y decreasing as each individual X either decreases or stops being part of the market.

    I think that can be summed up in the market for "technology" and is macroeconomically measured with the term "productivity", which almost always increases as economies develop.
    I agree so in sum you end up with a more competitive system if everything works correctly. The problem is that people aren't automatons. "Competition" isn't always how it works - either through monopoly or collusion in a high entry barrier industry. Sometimes there's only one customer (especially the government). Its like designing elaborate clockwork machines without taking into account air resistance, friction, and wear.

    11793-1.png
    Spoiler:
  • CauldCauld Registered User regular
    edited July 2008
    PantsB wrote: »
    Cauld wrote: »
    PantsB wrote: »
    PirateJon wrote: »
    a lot of capitalism is "minimizes inefficiency and lowers prices"

    This is a claim I hear a lot referring to capitalism, but to me its combining two things.

    It is beneficial in a capitalist system to make your own operation more efficient and to lower the prices you must pay. This increases your profit.

    It is not beneficial (at least not intrinsically) to increase the general efficiency of the system or to lower your own prices to below what you must.

    Profit can be defined as the differences in efficiency between what you can provide and what is 'needed' by others. Say I can do something for X units/product. A customer would require Z units to produce or otherwise obtain a product. You offer to exchange for Y units as long as Y>X and the customer accepts as long as Y<Z.

    So why would you want to increase the efficiency of the system in general if that resulted in Z coming down, or in the number of products needed came down?

    That doesn't mean capitalism isn't the best foundation for an economic system, but it also gives the invisible hand far more credit than Adam Smith did.


    I think the efficiency of the "system", as you put it, is merely the summation of those individual responses. And also the natural response of each individual to their 'competitors'. I think your explanation explains why an individual deal might be made. But to add another two variables, the customer C and you (the producer) B. C would only go to B if B > P (P = all producers). the competition between individual B's results in Y decreasing as each individual X either decreases or stops being part of the market.

    I think that can be summed up in the market for "technology" and is macroeconomically measured with the term "productivity", which almost always increases as economies develop.
    I agree so in sum you end up with a more competitive system if everything works correctly. The problem is that people aren't automatons. "Competition" isn't always how it works - either through monopoly or collusion in a high entry barrier industry. Sometimes there's only one customer (especially the government). Its like designing elaborate clockwork machines without taking into account air resistance, friction, and wear.

    I can agree with that to a large extent, but I thought you were referencing the general case. The government's role should be to keep the playing field level, though I admit it doesn't always succeed. In general I think it gets better over the long term. Natural monopolies are an intersesting scenario, and I think a strong argument can be made for the government taking over those industries.

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