..... Like the fact that markets are not perfect? That markets will not necessarily find equilibrium? That free markets will tend towards oligopolies / monopolies and that economies with greater social equality will have higher, on average, total output? Yep, I'm all for it. I am not sure you are though.
Before I go off in all directions what are you NoEnzLefttoSplit exactly saying?
By itself, it is incorrect to state that free markets will tend towards oligopolies/monopolies. That only happens when the technology lends itself to significant economies and scale and/or scope.
Not sure how you mix greater social equality into all this. Suffice to say that rich western countries who embrace market concentration and regulate it accordingly tend to have higher material standards of living, more generous welfare states, and better socio-economic mobility which over time will result in even greater economic outcomes.
1 Like the fact that markets are not perfect? 2 That markets will not necessarily find equilibrium? 3 That free markets will tend towards oligopolies / monopolies and that economies with greater social equality will have higher, on average, total output? 4 Yep, I'm all for it. I am not sure you are though.
1 First define "perfect".
Delivering some social goal that I define as inherently good is, of course, subjective. The whole question is irrelevant: markets don't have to serve any particular goal, markets are inevitable. There is always a market, it is always in play, and people will always respond to incentives within it.
2 Like chemical reactions, sometimes the response to a stimulus is loud and chaotic, but if you let it run its course it will find an equilibrium. Humans tend to intervene before that state (overthrowing a clueless regime that recklessly inflates a country's currency before people are reduced to subsistence living, for instance) but there is always an equilibrium stateâit just may not be a pleasant one.
You can blame the market (and I know you will!) but the market isn't malevolent or even sentient, it's just where the forces unleashed by various human actions play out. Failing to understand the reactions an intervention will provoke isn't a failure of the market any more than a mess in a test tube is a failure of chemistryâit's a failure of the chemist. 3 Show me one. Go ahead, I'll wait.
There are things economists call natural monopoliesâspring water from a particular source, say, or Kodak film* back in the day. In the case of control of a scarce resource (Lady Gaga's voice, for instance) there is still competition of type rather than in that specific commodity. These are created (setting aside government-granted IP monopolies for the moment) by entities (Kodak, or Lady Gaga) serving customers particularly well. If they act like a monopoly (that is, as if they didn't have competition and could do whatever they liked with price or supply) they incentivize innovation and competition.
Cartels and monopolies require government intervention to enforce them. There are always incentives (within a cartel, say, or outside a monopoly) to undercut them, and unrestrained people will respond to those incentives.
So show us an oligarchy or monopoly, and I'll show you a government** interveningâagainst market forcesâto prop it up.
4 Bring it!
*Yes, I realize that Kodak had rivals (Agfa and Fuji to name two) but their market share was tiny, at least where Kodak was allowed to compete. Kodak had excellent products and relentlessly innovated them, acting as if they had competition even when they didn't. But where is Kodak now? Their core competency didn't transfer to the technologies that replaced them, and they're effectively goneâthe dominant player in a game no one is playing.
** Or quasi-governmental bodyâlike a drug cartelâusing violence and intimidation. And usually the cooperation of at least one government.
I agree that it'll prove difficult to find a consensus on how the system works, let alone what we want from it.
I've always been amazed at the "magic trick" operated by economists who say that all will be for the best if we let things go without interference intervention. To the best of my understanding, they lay the foundation of their theory on the fact that economic agents are rational (a basic form of rationality, granted) and informed. That's just a joke. We're not informed. I wish there were a law that forces sellers to display the breakdown of the costs on the price tag (so much for R&D, manufacturing, transport etc.) At least you'd be able to decide who/what you're paying for beyond the thing you're buying. In my mind's eye, the invisible hand of the economy looks like the finger
about that intervention...
the government framework is supposed to help protect individuals from force and fraud
be it other individuals, groups or corporations
but what happens when it is captured via lobbying and effectively implements monopolies through special rules legalizing the force and fraud?
monopolies and corporations are government granted powers/fictions
1530s, "exclusive control of a commodity or trade," from Latin monopolium, from Greek monopÅlion "right of exclusive sale," from monos "single, alone" (from PIE root *men- (4) "small, isolated") + pÅlein "to sell," from PIE root *pel- (4) "to sell."
Alternative form monopole (1540s, from the Old French form of the word) was common in 16c. Meaning "possession of anything to the exclusion of others" is by 1640s; sense of "a company or corporation which enjoys a monopoly" is by 1871.
mid-15c., corporacioun, "persons united in a body for some purpose," from such use in Anglo-Latin, from Late Latin corporationem (nominative corporatio) "assumption of a body" (used of the incarnation of Christ), noun of action from past-participle stem of Latin corporare "embody, make or fashion into a body," from corpus (genitive corporis) "body, dead body, animal body," also "a whole composed of united parts, a structure, system,community, corporation, political body, a guild" (from PIE root *kwrep- "body, form, appearance").
Meaning "legally authorized entity, artificial person created by law from a group or succession of persons" (such as municipal governments and modern business companies) is from 1610s.
I agree that it'll prove difficult to find a consensus on how the system works, let alone what we want from it.
I've always been amazed at the "magic trick" operated by economists who say that all will be for the best if we let things go without interference intervention. To the best of my understanding, they lay the foundation of their theory on the fact that economic agents are rational (a basic form of rationality, granted) and informed. That's just a joke. We're not informed. I wish there were a law that forces sellers to display the breakdown of the costs on the price tag (so much for R&D, manufacturing, transport etc.) At least you'd be able to decide who/what you're paying for beyond the thing you're buying. In my mind's eye, the invisible hand of the economy looks like the finger
We can consider economics outside of any agenda, with the goal of simply understanding how a complex system worksâjust as a biologist can study life without having a plan to rearrange it. Economics can then inform policy without trying to determine it.
The temptation to meddle is irresistible, however, and as economic theories come in and out of political fashion economists often acquire the role of surgeon when prudence and humility would limit them to the role of, I don't know, anatomist or something.
What you're talking about is policy, the realm of politics. And what plays well-what can be sold to an electorateâalways trumps a sound policy recommendation. This is simply reality, and as I see it the economist's role here is to educate both policy makers and the electorate. Unfortunately here as well politics trumps not just sound economics but reality itself. Pick the policy you'd like and build a wall of economic obfuscation and deception to support it. People can be convinced the sky is falling when they are historically well-off; horribly destructive actions can be doubled-down upon, Paul Krugman can make a good living bloviating when he should be a laughingstock.
So I'm urging a different set of priorities: find the truth, however inconvenient for the policy you promote, rather than gathering ammunition for the direction you see as right & proper.
Like the fact that markets are not perfect? That markets will not necessarily find equilibrium? That free markets will tend towards oligopolies / monopolies and that economies with greater social equality will have higher, on average, total output? Yep, I'm all for it. I am not sure you are though.
Most basic economic models assume equal levels of information between trading parties. And while in reality some trades would have unequal results due to one party being less informed and thus swindled, in aggregate trades should be mutually beneficial.
I have felt that way after a purchase when I discovered that my information set was in hindsight incomplete.
Must object to the term swindled. For one, ethics and morality are absent from most rigorous models of behaviour. Rightly so. Get too close to value judgement and the discussion never ends. One can never reject a hypothesis.
For two, information is costly. We can cite all kinds of economic behaviour that seeks to reduce the costliness of acquiring information and analyzing it. Popular brand names for example.
Suppose that people who search markets pay on average lower prices than those who buy from the first discovered supplier. Does that mean that people who, for whatever reason, only buy from the first supplier are constantly "swindled"?
we cannot have a rational discussion about economics until we know what aims we are pursuing (and on this we will differ): do we want to maximize sustainability, equality, diversity, output, or individual liberty, to name just a few?
These are not necessarily mutually exclusive aims, but they frequently are.
Secondly, in the unlikely event that we should agree on the kind of outcome we seek, we can start discussing how to get there.
In my experience, most economic discussion focuses on the nuts and bolts of how to get there when the participants actually disagree on where that "there" is.
And then, even if we do reach some kind of consensus on where to go and how to get there, none of us can escape the fact that the future is full of surprises, despite our best research (or indeed, because of it). We are in the position of driving backwards in a very sophisticated machine at an increasing speed, using the past to extrapolate the road yet to travel.
Given all this, my personal position is very definitely one of centrism and prudence. I think we should be keeping resources in reserve for a rainy day and not maximizing their exploitation. I also think we should be maximising the well-being of the whole and not the maximum wealth of the individual (and even some billionaires agree on that). I think it is only prudent to maintain proper stewardship of the ecosystem, for its own sake. (I mean it is a system that obviously works well without human control and is the cradle in which we evolved - so why ruin it?).
your mileage (going backwards) might vary...
We can consider economics outside of any agenda, with the goal of simply understanding how a complex system works—just as a biologist can study life without having a plan to rearrange it. Economics can then inform policy without trying to determine it.
The temptation to meddle is irresistible, however, and as economic theories come in and out of political fashion economists often acquire the role of surgeon when prudence and humility would limit them to the role of, I don't know, anatomist or something.
What you're talking about is policy, the realm of politics. And what plays well-what can be sold to an electorate—always trumps a sound policy recommendation. This is simply reality, and as I see it the economist's role here is to educate both policy makers and the electorate. Unfortunately here as well politics trumps not just sound economics but reality itself. Pick the policy you'd like and build a wall of economic obfuscation and deception to support it. People can be convinced the sky is falling when they are historically well-off; horribly destructive actions can be doubled-down upon, Paul Krugman can make a good living bloviating when he should be a laughingstock.
So I'm urging a different set of priorities: find the truth, however inconvenient for the policy you promote, rather than gathering ammunition for the direction you see as right & proper.
we cannot have a rational discussion about economics until we know what aims we are pursuing (and on this we will differ): do we want to maximize sustainability, equality, diversity, output, or individual liberty, to name just a few?
These are not necessarily mutually exclusive aims, but they frequently are.
Secondly, in the unlikely event that we should agree on the kind of outcome we seek, we can start discussing how to get there.
In my experience, most economic discussion focuses on the nuts and bolts of how to get there when the participants actually disagree on where that "there" is.
And then, even if we do reach some kind of consensus on where to go and how to get there, none of us can escape the fact that the future is full of surprises, despite our best research (or indeed, because of it). We are in the position of driving backwards in a very sophisticated machine at an increasing speed, using the past to extrapolate the road yet to travel.
Given all this, my personal position is very definitely one of centrism and prudence. I think we should be keeping resources in reserve for a rainy day and not maximizing their exploitation. I also think we should be maximising the well-being of the whole and not the maximum wealth of the individual (and even some billionaires agree on that). I think it is only prudent to maintain proper stewardship of the ecosystem, for its own sake. (I mean it is a system that obviously works well without human control and is the cradle in which we evolved - so why ruin it?).
They also assume rational and predictable behaviour amongst participants. Their inherent basic flaw.
It might be better to say that those models fail to take into account less than rational decisions. But my guess is that again, in aggregate, rational decisions outweigh irrational ones.
But rationality itself presupposes a certain framework that itself might be basically flawed due to a lack of information on the part of ALL participants or is premised on a set of faulty axioms. Just look at the erratic swings and roundabouts in public opinion over the decades since WWII. It is a pretty fickle beast. I met a biologist who thought our current passion for exponential growth was in itself an expression of collective insanity as we race towards the edge of the petri dish. Barring additional technological breakthroughs in food production, she might be right. There are plenty of examples in history of people acting rationally but based on a set of completely flawed axioms.
They also assume rational and predictable behaviour amongst participants. Their inherent basic flaw.
It might be better to say that those models fail to take into account less than rational decisions. But my guess is that again, in aggregate, rational decisions outweigh irrational ones.
The common law underpinning for the magic of the marketplace is caveat emptor. let the buyer beware. Calls into question the notion that all trades are inherently mutually beneficial.
Most basic economic models assume equal levels of information between trading parties. And while in reality some trades would have unequal results due to one party being less informed and thus swindled, in aggregate trades should be mutually beneficial.
They also assume rational and predictable behaviour amongst participants. Their inherent basic flaw.
The common law underpinning for the magic of the marketplace is caveat emptor. let the buyer beware. Calls into question the notion that all trades are inherently mutually beneficial.
Most basic economic models assume equal levels of information between trading parties. And while in reality some trades would have unequal results due to one party being less informed and thus swindled, in aggregate trades should be mutually beneficial.
Location: Perched on the precipice of the cauldron of truth
Posted:
Nov 9, 2019 - 9:36pm
NoEnzLefttoSplit wrote:
The common law underpinning for the magic of the marketplace is caveat emptor. let the buyer beware. Calls into question the notion that all trades are inherently mutually beneficial.
Brink Lindsey is the Vice President and Director of the Open Society Project at the Niskanen Center, and Steven Teles is a Professor of Political Science at Johns Hopkins University and a Senior Fellow at the Niskanen Center. Today, they join the show to discuss their new book, The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality. For Lindsey and Teles, slow growth and inequality are “twin melees” that are harming the economy. They discuss some of the issues at the root of these problems, including excessive occupational licensing laws and zoning regulations, as well as some ways to fix them.
Ah, a target-rich environment! It seems the posting of a humorous video on a topic that 30 years ago (1989, remember? You do remember that, right?) had become obvious to anyone with frontal lobes is now controversial. Pity I've got a hell of a long day and a long week after that, or I'd tackle the responses one at a time. This is going to have to do.
I'll start with the notion that an economy is designed or constructed, and that these designs are craftily configured to benefit some class or subgroup. Can it be that there are no such things as a self-organizing systems; that all human behavior results from some plan or intervention?
How clever of that first homo habilis who traded a flint tool for a hide to be thinking of J. Pierpoint Morgan and his business empire! Genius. How could he know?
I can just about hear the postmodernist knees jerking: declining to intervene in that trade is itself an intervention! OK, an intervention in what? There must be an underlying order to intervene inâan ecology created not by design but by the interactions of self-interested participants. Prove me wrong: show me a human society that does not trade.
No, this does not suppose some intelligence directing it or self-perpetuating entity (a la Gaia hypothesis) but the observation that all natural processes eventually reach a stable equilibrium. Humans are not immune to that truth.
And, as all of human history shows, trade is not zero sum: if unconstrained by threat of force or other compulsion both parties trade to their own benefit. I want that hide more than I want the stone tool I just made, because I know how to make another with less effort for me than it would take to get the animal and skin it. The hunter wants the tool because he can collect a hide with less effort than it would take him to make that tool. Both come out ahead in the trade. If it isn't mutually beneficial it won't happen. To make it unfair...intervene.
To an anti-capitalist that intervention is part of capitalism, inherent in it and inseparable, because of course you're going to intervene. No one can be trusted to know his own best interest. So not intervening is just a way of cementing in place all the previous interventions.
And bald is a hair color.
Trade is an ongoing process, no state is permanent, and no accumulated wealth stays accumulated without continued effort. How are the descendants of the robber barons doing? Think the Kardashians will stay idle rich once the spotlight shifts? Yes, there will be people who are more or less adept (or just luckier) at the act of trading than others, and will accumulate more wealth. That doesn't mean the process is unfair any more than it's unfair that Maria Callas could sing better than Yoko Ono. Audiences will listen to voices they prefer...unless someone intervenes to stop them.
Then along comes Marx.
His supposed insights into the nature of capitalism and humanity resulted in a theory about history. To quote Richard Feynman "It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong." Even Marx's admirers (at least those who admit to being admirers) in this discussion will admit that his theory was utter crap. Why that doesn't call into question his observations on capitalism is an eternal mystery, but let's press on.
Marx was part of an intellectual movement of the 19th century that sought the credibility of science by using its language without its rigor. There were all kinds of theories being developed to explain things about the human race, and their admirers applied them without testing them, and even when more-disciplined investigators and history itself later proved them wrong their influences persist.
I have not read every page of Das Kapital, despite trying. Neither have, I'll wager, the vast majority of Marxistsâit's the intellectual equivalent of trying to wade thru deep mud. I also have not read the foundational texts of alchemy, astrology, or necromancy. We have much more accurate explanations for the natural processes they sought to explain; explanations that can be verified by experiment and experience and which have predictive power. Delving into their unsound reasoning is a waste of the few years we have in this life. Maybe he saw something in his studies that othersâpeople whose thinking (derived from their own observations)âmore accurately described the human condition...missed. Sure. Let's hear it.
Mostly what I hear from Marx's fans are variations on the theme that life is indeed a zero-sum game; that if one person got rich it's because they made someone else poorer. This notion is evergreen, despite the evidence (starting with homo habilis) to the contrary. These observations aren't just descriptive, they are prescriptiveâand those prescriptions have proven toxic.
Lazy, who the hell on Earth are you talking to? Is there some audience out there we are not privy to? I am guessing you have a bone to pick with the myriad Marxist academics out there (yes I know one). But there aren't any here.. unless I missed something. as for your economics, which I hold for being every bit as myopic as the extreme left: 1) not intervening in a chaotic system is like not trying to balance a wheel. Sure, that is an option, but the wheels will fall off the bus sooner or later. Sure you can then open a new field of business in repairing damaged buses and fixing broken legs... but is this really the most attractive option? 2) free trade economics is a wonderful system and responsible for a vast improvement in human well-being, but so are volcanos. There is nothing wrong in mitigation planning. In fact there is not one single national economy out there that does not plan/steer its economy to some extent for this very reason. 3) free trade also presupposes a commonly understood foundation of rights and duties. The alternative is called rape and pillage. 4) we can talk about this commonly understood foundation of rights until we are blue in the face (and we have) but it is the sine qua non of all free trade systems. Your assumption of a rights-based system as being a priori, a given, before any cultural or historical context, is for me no different at all to the Marxist assumption of class consciousness and every bit as misleading. Sure, we could easily have a perfect system if all the players in that system were perfectly educated, perfectly aware and perfectly fair in their dealings with one another. But they are not. They are human. They are very frequently irrational. And they will only buy into a system of rights and duties if they see some benefit for themselves. And perceived benefits are not just absolute but relative. That is also part of being human.
btw, as of today, "The richest 2% own more than 51% of the global assets and the richest 10% own 85% of the global assets." (Wikipedia) and this state of affairs is DESPITE the massive redistribution of wealth that you despise (taxes, social benefits, etc.) That is what I call an unbalanced wheel. I don't give a shit if someone has a super yacht as long as I can have my sailing dinghy, but when even the owner of that super yacht envisages the breakdown of western society and the economic system and is preparing for it, I start having serious doubts about the stability of the system - and my ability to keep a sailing dinghy.
Keynes General Theory is tough slogging; Das Kapital is worse. I have not read either.
I would recommend a) to read the Communist manifesto by Marx — it is short and sweet, and b) to focus on Neo-Marxist writers such as Baran and Sweezy, world system theorists like Immanuel Wallerstein and probably the most corrosive Neo-Marxist theory out there: Dependency Theory.
With no exceptions, Neo-Marxist guided populist regimes in Latin American and Africa have been costly disasters. At least the old-style communists (Marxist-Leninists) believed in science and the opinions of experts no matter how many mistakes they made. Modern Neo-Marxists cannot be bothered with science or evidence-based policy.
Ah, a target-rich environment! It seems the posting of a humorous video on a topic that 30 years ago (1989, remember? You do remember that, right?) had become obvious to anyone with frontal lobes is now controversial. Pity I've got a hell of a long day and a long week after that, or I'd tackle the responses one at a time. This is going to have to do.
I'll start with the notion that an economy is designed or constructed, and that these designs are craftily configured to benefit some class or subgroup. Can it be that there are no such things as a self-organizing systems; that all human behavior results from some plan or intervention?
How clever of that first homo habilis who traded a flint tool for a hide to be thinking of J. Pierpoint Morgan and his business empire! Genius. How could he know?
I can just about hear the postmodernist knees jerking: declining to intervene in that trade is itself an intervention! OK, an intervention in what? There must be an underlying order to intervene inâan ecology created not by design but by the interactions of self-interested participants. Prove me wrong: show me a human society that does not trade.
No, this does not suppose some intelligence directing it or self-perpetuating entity (a la Gaia hypothesis) but the observation that all natural processes eventually reach a stable equilibrium. Humans are not immune to that truth.
And, as all of human history shows, trade is not zero sum: if unconstrained by threat of force or other compulsion both parties trade to their own benefit. I want that hide more than I want the stone tool I just made, because I know how to make another with less effort for me than it would take to get the animal and skin it. The hunter wants the tool because he can collect a hide with less effort than it would take him to make that tool. Both come out ahead in the trade. If it isn't mutually beneficial it won't happen. To make it unfair...intervene.
To an anti-capitalist that intervention is part of capitalism, inherent in it and inseparable, because of course you're going to intervene. No one can be trusted to know his own best interest. So not intervening is just a way of cementing in place all the previous interventions.
And bald is a hair color.
Trade is an ongoing process, no state is permanent, and no accumulated wealth stays accumulated without continued effort. How are the descendants of the robber barons doing? Think the Kardashians will stay idle rich once the spotlight shifts? Yes, there will be people who are more or less adept (or just luckier) at the act of trading than others, and will accumulate more wealth. That doesn't mean the process is unfair any more than it's unfair that Maria Callas could sing better than Yoko Ono. Audiences will listen to voices they prefer...unless someone intervenes to stop them.
Then along comes Marx.
His supposed insights into the nature of capitalism and humanity resulted in a theory about history. To quote Richard Feynman "It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong." Even Marx's admirers (at least those who admit to being admirers) in this discussion will admit that his theory was utter crap. Why that doesn't call into question his observations on capitalism is an eternal mystery, but let's press on.
Marx was part of an intellectual movement of the 19th century that sought the credibility of science by using its language without its rigor. There were all kinds of theories being developed to explain things about the human race, and their admirers applied them without testing them, and even when more-disciplined investigators and history itself later proved them wrong their influences persist.
I have not read every page of Das Kapital, despite trying. Neither have, I'll wager, the vast majority of Marxistsâit's the intellectual equivalent of trying to wade thru deep mud. I also have not read the foundational texts of alchemy, astrology, or necromancy. We have much more accurate explanations for the natural processes they sought to explain; explanations that can be verified by experiment and experience and which have predictive power. Delving into their unsound reasoning is a waste of the few years we have in this life. Maybe he saw something in his studies that othersâpeople whose thinking (derived from their own observations)âmore accurately described the human condition...missed. Sure. Let's hear it.
Mostly what I hear from Marx's fans are variations on the theme that life is indeed a zero-sum game; that if one person got rich it's because they made someone else poorer. This notion is evergreen, despite the evidence (starting with homo habilis) to the contrary. These observations aren't just descriptive, they are prescriptiveâand those prescriptions have proven toxic.
