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Modern economic theories and YOU!
Vincent Grayson
Frederick, MDRegistered User regular
Frederick, MDRegistered User regular
So, with the news of Milton Friedman's death today, I thought a discussion of economic theory would be an appropriate way to honor him.
You've got your Adam Smiths, and your Keynes' and your Marx, and everything inbetween. I'm curious D&D, in a world where you had the means to affect change in American, or global economic policy, where would you steer us?
Is government intervention necessary to for a stable society? How important is stability and fairness? Is it worth giving up certain economic freedoms to achieve?
Personally, I find myself siding with David Friedman, Milton's son, and author of several books focusing on the idea of a very very minimally interventionist government.
I realize, of course, that a true free market will never exist, until and unless we can get everyone involved to agree to it, which would of course mean the entire world, so it's a pipe dream. For now though, I'm content to try and push for less government intervention, and less market regulation.
How about you fuckers?
You've got your Adam Smiths, and your Keynes' and your Marx, and everything inbetween. I'm curious D&D, in a world where you had the means to affect change in American, or global economic policy, where would you steer us?
Is government intervention necessary to for a stable society? How important is stability and fairness? Is it worth giving up certain economic freedoms to achieve?
Personally, I find myself siding with David Friedman, Milton's son, and author of several books focusing on the idea of a very very minimally interventionist government.
I realize, of course, that a true free market will never exist, until and unless we can get everyone involved to agree to it, which would of course mean the entire world, so it's a pipe dream. For now though, I'm content to try and push for less government intervention, and less market regulation.
How about you fuckers?
Vincent Grayson on
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It's government's job to step in whenever the self-regulation of the free market fails, which is a lot of the time.
Fix'd. The selfish motivations of corporations will always be a prime impetus for these groups to find a way to maximize their profits and this often takes the form of abuse of the system. You add a new regulation and they'll find a new way to abuse the system. The only way to fix this is to have total regulation of the economy... in my humble opinion.
Sorry, but the only thing the USSR proves is that Stalinist state capitalism doesn't work and that Marxism doesn't work if you ignore half of the economic system.
For total abuse of the system? If your argument is that government regulation invites abuse by corporations, how does more regulation solve this?
Government regulation doesn't invite abuse, it just forces them to find a new avenue of abuse. Corporations will always find a way to abuse the system as long as they are controlled by private parties. Take out the private parties and you get a corporation that has no motivation to abuse the system.
Personally, I'd prefer the government not touch issues like minimum wage, and spend more time making sure the actual cost of production is being paid somewhere along the line. Currently, it seems like many corporations are producing items at a much lower cost to themselves (and as such, us as well) than they really should be. I think externalities are becoming, and will continue to be, a huge issue, and that they aren't addressed nearly as thoroughly as they should be.
I believe, perhaps naievely, that if every business was forced to produce at the actual cost, rather than a lower cost by ignoring the future consequences of their actions, that corporations as a whole would end up a lot more "honest", although, I have to wager, many of them would be forced to go out of business, as there are probably quite a few that simply wouldn't be profitable with appropriate actions taken against the externalities they create.
And any actual macro economic discussion should be done using the real business cycle or new keynsian models. keynesian and neo-classical are about 30+ years outdated.
USSR was not communism. That is what he is saying.
Then again, it's the lesser of two evils, I'd rather have a democratically elected group in charge of the economy than some transnational organisations.
Fails in what way though? What is it we're expecting the free market to do, and why is it failing to do so? Should everyone have the same economic power, regardless of risks taken, skillsets, work ethic, etc? Should the inevitable disparate starting positions people get be forced into some form of equality? Does every human being have the same value, and capitalism in its' purest form ignore that?
*edit:spleling
Shinto's not wrong. Especially recently, most drives to impose specific regulations or deregulations were made at the behest of specific interested parties. Most of what fucked up the California energy markets, for instance, was targeted deregulation that was done through the democratic system and heavily urged by large political contributors (also part of, for better or worse, our democratic system).
Marx was very clear about the evolution of communism. It looks something like this:
Feudalism->Capitalism->Socialism->Communism
Russia, Cuba, numerous South-East Asian Countries, China tried to do this:
Feudalism->Communism
See the disconnect? It tells us that those nations were enamored by the ideal of communism so much that they decided to jump the gun and try communism a century or more too early. That is all it tells us.
However, if Germany somehow turned to communism and somehow they wouldn't be nuked to smithereens within 24 hours, would it actually work?
1) Everyone's better off in the free market: by making the pie bigger everyone winds up with a fatter slice, the invisible hand carries us all to victory and so forth. I find this unpersuasive because I think it's just making a factually incorrect claim about the results of minimally regulated markets--industry with free reign results in slave labor and massive inequality.
2) People should be free to do what they want with themselves, and the free market is a consequence of that. This is not a factual claim, but a moral one, and one which I find equally unpersuasive. If the "freedom" we're talking about results in a deeply unfair and inhospitable society, then it's not the type of freedom we need.
Of course, these are rather simplistic responses. I'm offering them as summaries, and to indicate that there are two distinct lines to be taken in a debate over economic policy.
triple fixt.
It's just as important only involve WHERE it's necessary, as that they only move WHEN necessary. A hell of a lot of what the government does to regulate the market is not only mistimed, but misfocused.
I'm looking specifically at the protection of bloated and outdated industries like the airlines and automakers, among others. Proping up long dead and completely nonviable industries for political just hurts us all in the long run.
My personal opinion is no. While many European countries are socailising, I don't think they are nearly to the point where they can make that last final transition to communism. They are not yet to the point where they could afford to have everyone be unalienated from their labour, which is probably the largest obstacle to a communist nation. Honestly, I think the first country to achieve something resembling communism will be Japan. I believe that automation will be a key to implementing a successful communist system and Japan is years ahead of us in that regard
Great, so now all we have to worry about is giant communist robots.
What's to worry about? I for one welcome our new communist robot overlords!
Better red than dead, Dave.
Great movie idea, or greatest movie idea?
This is one of the best arguments against heavy government regulation. In an ideal world full of nothing but good, honest people motivated solely by altruism, it's possible that lots of government regulation would be beneficial (though I would disagree with that assertion). However, we live in the real world, and legislation isn't always crafted by nice, wonderful people. A given market regulation can just as well fuck the people as help them, and the more the government gets involved, the more of these types of shitty legislation are going to exist.
Government should definitely get involved, but it should be in more general, large-scale, transparent fashions. Government should make things like fraud, and glaring deceit illegal. It should promote transparency in private industry through things like the SEC. It should keep certain unethical actions that result in monopolies illegal (though monopolies themselves shouldn't be wholly outlawed). It can tailor the personal tax code to give the poor a leg up. It can provide for a safety net for people who are having a temporary string of bad luck. These are all good things, and they're largely things that Friedman agreed with.
I fucking hate it when people strawman capitalism as "People should be able to commit fraud and blatantly unethical behavior without repercussion," because no serious proponent of capitalism actually believes that. Nine times out of ten, capitalism works just fine, unfettered by government fuckmuppetry. It's that one time in ten that everybody obsesses over, and it causes people to demand government intervention. And usually, this government intervention results in a situation in which some segment of industry gets ahead while some other segment gets fucked. It doesn't solve problems, it just shifts them around and makes it easier for the unscrupulous companies to take advantage of loopholes.
See, there's the thing. Every single law you write creates an unintended loophole somewhere. Every single one. The nature of legislation is such that it's impossible to write a law without someone being able to subvert its purpose for their own ends. The more laws you have, the more loopholes you have, and the more ways you have for people to act in ways that that the law didn't intend while generally being rewarded for it.
It's also the long time name of any Shacknews clan/guild in various games, although Blizzard made us change it in WoW because the communism reference was "inappropriate"
The general argument, which is somewhat parallel to your statement regarding "increasing wealth" is that wealth increases generated under pure capitalism tends to strongly aggregate in the hands of the already wealthy, thus increasing the maldistribution of wealth.
More broadly, capitalism does many things well, and sometimes parallels the broadly-defined "greater good". However, they're not the same thing, and where free-market capitalism strongly conflicts with the "greater good," it should be curbed or regulated.
We've grown attached to associating capitalism with the "American Way of Life," but it's worth remembering that our economic concerns are subordinate to our political concerns, as defined in the constitution. There is no explicit provision for "economic liberty" per se.
The problem is that those willing to be unethical drive those who are ethical out of business. So, even though "nine times out of ten" the businesses are ethical, eight times out of nine those ethical businesses don't stay businesses for very long.
Imagine that we are all designing the future society we are to live in, but none of us knows who we'll be. This is a little like balancing a multiplayer map before a game. This social structure is presumably the just one, because it's one that everyone would have agreed to in this original position of no knowledge--Rawls is updating contract theory here.
Now, in such a situation, the basic tenets of justice we would choose would be: 1) Everyone gets the most liberty compatible with equal liberty for all, and 2) Inequalities are only permissable insofar as they are beneficial to the least advantaged group. We would choose these principles, because, not knowing who we're going to turn out to be, we don't want to get fucked.
Number two provides us a test for the justice of our society. Are its inequalities working to benefit the least well-off? It's clear that some inequalities, such as those introduced by different pay rates for different jobs, and the market as a whole, are to an extent beneficial to everyone, including the least advantaged groups. However, it's also clear that we allow many inequalities that do nothing for the least advantaged--you'd have to stretch pretty hard to justify, for example, our current education system as benefiting the poor, the stupid, minorities, and the disadvantaged in gerenal more than some alternate scheme, be it vouchers, completely nationalized education, or what have you.
So, in sum, the market is only of limited awesome, and needs heavy correction.
I'm with Jeffe on this one. I think the biggest problem in capitalism these days is information, and I think that should be where the government's focus lies...making certain that consumers are as informed as possible about the manner in which businesses are operating, including the true costs of their operations. This allows everyone to make informed, rational decisions, and companies operating unethically get found out, and unless, for some reason, the market *wants* to keep them around, they go out of business.
Granted, perfect information is hard to achieve, but anything is better than the way things are currently. With more information, we, as consumers are better off, and ethically run businesses are better off, and that benefits us all.
I dunno, Jeff. Corporations are not individuals, and are generally not especially beholden to ethical considerations. Or really, any considerations save increasing shareholder value (assuming no internal corruption, in which case it would be leavened with increasing executive compensation).
I cannot think of a situation in which strong deregulation of any industry didn't end in gross corporate abuses across the aisle. I also think that globally speaking, the least regulated/ "free-est" markets are the ones most heavily punctuated by horrible abuse (I'm especially looking at Russia).
By the same token, every instance of deregulation or tax-cutting has the same chaotic ripple effect with unintended consequence. Additionally, the simple premising of the "lassez faire" market as the somehow "natural state" evades the discussion of what a horrible horrible place it would most likely be. It's a bizarre article of faith in this country that freer markets always implies better life.
"Unintended consequences" is, perhaps, a call for deliberation before enacting policies, but it is most emphatically not a condemnation of economic policy or governmental interference.
OLOL Externalities.
I despise Wal-Mart as a corporation. I find their practices and ethics abhorrent, I think they're substantially contributing to terrorism, and that they're doing their damnedest to insure that the developing world never sees industrialization. They treat their employees like shit, and they drive better businesses out of business. They are, I believe, the most evil corporation on the face of the planet.
And yet I shop there. Why? Because Wal-Mart isn't going to notice the $1000 (or whatever) I spend there annually. I, however, will notice the $200 I save by spending there, instead of shopping somewhere else. So, if it doesn't work under our current model, why would it work under this theoretical "perfect information" model?
We dont really have to strawman them Jeffe, it is their arguement. Shit, i have had economics professors that have said that their right to hire whom they wanted trumped the property rights of human capital for gays.
This isnt a marginalized position, it is a mainstream position. Take for instance the clean air act. If it really reduced pollution, businesses would hate it, becuase pigovian taxes penalize polluters more than regulations.
There is a large move to reduce the governments ability to protect against fraud and other malefescent acts.
IRT loopholes.
A loophole does not create new ways of acting, it only allows an old way to continue in use Even laws with loopholes will reduce the intended behaviour. Loopholes are flaws in that there is a limit to the amount of behaviour legislation can make, but it does not change the fact that it does change behaviour, and that without the regulating legislation [so long as the regulations do a good thing], the net effect over no legislation is positive.
At the moment though, you're just saying you *THINK* WalMart is doing all of these awful things, if you knew, and everyone else knew, then legislation could be enacted to make certain that the cost at which they sell goods accurately reflects the true cost of those goods...so either their prices would climb to the point where they simply wouldn't stay in business, or they'd have to change some of their core business practices in order to continue to produce goods at a low enough cost to keep people shopping there.
Either Walmart is fucking things up, or not. If not, then cool, you're paying a good price for something you want. If they are, you're paying far less than you should be, and wouldn't be shopping there at all if everyone had more and better information.
This is commonly referred to as "regulation".
Right, and as I've said before, regulation dealing with information flow and externalities is the only kind I'm ok with.
Seriously, though, I don't know how to reconcile kakos' apparent position that capitalists will always exploit the system to profit themselves even at the sake of morals and ethics, while communists will seek to fully regulate the economy only in a manner which benefits all. It's like he's talking about two different races of sentient beings. The reality so far is that communism breeds more corruption that capitalism. Though, of course, no one's ever really implemented communism correctly. I imagine no matter how many times communism fails, it will always be because someone didn't implement it properly. Oh well.
However, as technology and society progress, I do feel that eventually certain forms of socialism and communism become necessary as traditional economic principles fall apart. We're a long way from anything like that.