I See What You Mean, It Is Broken

Lately, I've been hearing a lot about how recent events in financial markets show that capitalism is broken.

When regular old workers are thrown out of work and their lives are thrown into turmoil, we're told that's capitalism functioning as it should, creative destruction, dynamism, able to respond quickly to changes in conditions and all of that. It's a big shock to the workers who lose their jobs and their source of steady income, even more so for the large number who don't qualify for unemployment compensation that allows the unemployed to replace about half their lost income, at least for a time, but a necessary shock according to the creative destructionists.

However, when executives face the same dynamism and their income falls (so that they also face a reduction in their income, say from a million to half a million), global capitalism is broken and needs to be fixed (e.g. "Market Bloodbath Highlights Cracks in Capitalism," one of many along these lines).

So, when only workers are affected, it's capitalism doing what it does best. But when it's executives who are facing the turmoil, capitalism needs fixing. I actually agree that we could do more in terms of both preventative policy (better regulation of the financial sector for example) and stabilization policy (see the less than optimal current fiscal stimulus package) to help capitalism function better, it's just interesting how much louder the calls are to fix the system when it's the executive ox that's getting gored.

Comments

[marcello]

Mark, that is only a corollary to a long known result-
the US economy is socialism for the rich, and capitalism for the ppor. Free market discipline for the great unwashed, but protection from the nanny state for the elite. The poor will work harder if they had less, the rich, if they had more....
... and on and on and on it goes.

_maybe_ oneday the great unwashed will look at this and a couple hundred million light bulbs will collectively turn on . . .

[gordon]

The problem which Prof. Thoma describes in his post perhaps reflects the divergence between the economic system (the productive system which satisfies wants) and the financial system, which includes the stock market, futures markets, and all transactions which can't be tied fairly directly to satisfying wants. There shouldn't be a divergence, but it seems to me that there is, and that the financial system has a weird life of its own which has the potential, when it becomes disordered, to damage the economic system. What Prof. Thoma calls "capitalism" seems to encompass both, and I wonder whether we would do better to begin making an explicit distinction.

[STS]

It isn't "omigod, some rich guys are losing money" that is the failure. It's the fact that there has been a regulatory lapse of epic proportions which may result in severe consequences to lots of innocent bystanders.

I like hopping into my car and driving where ever I feel like going. That feels like *freedom* to me. But I wouldn't like to attempt that on roads that weren't maintained, had no lines or other markings, no signs, no traffic signals, no route identifiers or warnings of where exits are. There is a ton of infrastructure in place that *regulates* my use of the road. And it ADDS to the experience! It's a net plus not only to some abstract "society at large", but to ME.

When you buy or sell a stock via some electronic brokerage, there isn't just the cool electronic communication involved. There's also a clearinghouse, a legal structure around how the price is established, how and when settlement occurs. The idea that free markets "don't need no stinkin' regs" is simply incoherent. The question isn't whether to regulate , but *how* to regulate.

But on the financial road, all the traffic cops have been fired or told to stop writing citations. It's time we stopped believing the lies about why we don't need any cops and got them back out on the beat.

[F. Frederson]

it's just interesting how much louder the calls are to fix the system when it's the executive ox that's getting gored.

The executive ox isn't getting gored. Shareholders large and small are getting gored, as well as employees and retirees. The executives that created this mess are riding off into the sunset with huge bonuses.

And the ones that are still on the job are asking for bailouts, not to "fix" capitalism on a long-term basis. Big, big difference.

[Movie Guy]

There is so many things broken right now that it is a national embarrassment - for many governments at all levels in the USA, various industries, and a motherload of corporate interests.

It's disappointing.

[Curt Doolittle]

This is not a failure of capitalism. It is a failure of government to administer the problem that they created by interfering with capitalism.

[reason]

The usual socratic idealist libertarian idiot trolls peep up. You can never lose can you? No matter how much we follow your idiotic ideology, you can always spot some tiny stain. (The free market equivalent of "Christianity has not been tried and failed, it has never been tried".)Curt wake up and realise that you need a government PROCESS, that it needs to be responsive and to learn and evolve, in order to establish these sort of markets in the first place. Read and understand STS's excellent post.

I like it in the article where it says that global was too young and immature or this would never have happened. Uh hmmm. Tulips, south sea bubble, great depression. Humans are slow learners, and great rationalisers.

STS

[reason]

Oops that STS at the end was just meant to again say how good STS's post was!

[Lafayette]

MT: It's a big shock to the workers who lose their jobs and their source of steady income

To better everyone's lot in life

And, this is not the first time it's happened. Just go read Steinbeck's "The Grapes of Wrath" and you'll have a Very Good rendition of the heartbreaking toll of the last serious Recession (of the 1930s). (Or, if too lazy to find the book, rent the film.)

By comparison, we're still in pretty good shape.

Which does not mean that everything is just fine. There is nothing that cannot be got right by lessening Income Inequality. If, however, Americans think that is going to happen "naturally" with their Blind Faith in the market system, then they are seriously shortsighted.

Europe has been suffering (I wonder if that's the right word) these past two decades from too much Statism -- and America now recognizes that its Social Safety Net is full of many LARGE holes. The list of deficiencies in the American economy is long and sad. From Health & Education to Employment to Affordable Housing (and I'll stop there) -- all these sectors could be better served, much better served.

And, I will hammer the nail once again. It is NOT the Market System that will assure these economic sectors are up to the challenge of our needs. Free Enterprise markets are suitable for finding profitable solutions to Demand and Supplying them. Such Free Markets perform poorly, however, when called upon to meet autonomously the Demand for which there is no inherent profitability that would coincide with the general interest of the population. (Key word: autonomously; in this context meaning without being prompted by the state.)

Which is why there is the Government to step in at such times when a specific Market Demand cannot naturally be met by the agents of Supply and which require Government Sponsored Procurement. These cases are not that many, but they are strategically important. National Defense is one. R&D is another. Primary/secondary education another. Housing is often another. And some services to the person, depending upon their condition, are yet another.

America need not make the same mistakes as "too much Statism". But, if Europe is learning the benefits of Free Markets to reinvigorate its industry and commerce, America can learn the advantages of some Statism when it is obviously necessary to better everyone's lot in life.

[Lafayette]

STS: There is a ton of infrastructure in place that *regulates* my use of the road.

Human Infrastructure

I think "infrastructure" is taken for granted by Americans. Or, they think it is limited to transport, energy and telecoms?

Infrastructure is (also) the basic framework of societal organization. It covers much more than just Public Works. Yes, you are right mention the Judicial and Legal system that regulates transactions of all kinds. It is an integral part of our economic infrastructure without which the economy would dysfunction.

I submit, however, that the state/government has the responsibility to assume the challenge of Human Infrastructure as well.

Know-how, or the skill set of our workforce, is also part of another set of infrastructural capacities. When educated people work better because the have the competency to do so, then all of industry and commerce is enhanced. They become more mobile, less dependent upon one set of skills learned/applied in only one profession/industry.

And, when education allows them to change or enhance skills/competencies, that flexibility remains with them throughout their professional lives. And, even into retirement (should they need them).

Let's not overlook the need for Human Infrastructure capabilities. They are, quite possibly, the most important. Remember, only a third of Americans have a university qualification.

Finally, I don't see how depending upon individual Philanthropy or Personal Debt, to educate our youth, is adequate to the challenge at hand. To my mind, post-secondary education (all included) is a birthright that should be assured as a Public Service. It should be accessible to all who want to pursue education/training up to the level of their individual capacities -- through out their lives and not just at the beginning.

The more people that have advance skills, the more productive we are and, therefore, the better off we all are. The better off we all are, the stronger our nation becomes.

[Bob]

Fix capitalism ?

It's just getting to the point where things are starting to even out a little bit.

Saw a documentary on PBS a few weeks ago about how kidnappings of the rich are rampant in South America

Seems the dim witted rich folks down in South America have destabilized their respective countrys so badly that they ended up screwing themselves.

They showed several interviews with affluent individuals that are ready to crap in their pants every time they have to leave the house.

One guy said when he drives his car he has to constantly scan his mirrors and be careful about where he stops his car at a light.

This seems to go along with what a relative told me about his visit to S.A. He said rich people often live behind very high walls and must be very careful whenever they leave home.

[ken melvin]

Good comments. Yes Lafayette, Steinbeck would indeed recognize the cold sick and hungry day laborers lined up along High Street and Fruitvale in Oakland these days. He’d know that those responsible were the bastards that enticed them here so that they, the bastards, could hire someone for half wages and pocket the rest. For them, the ‘capitalists’ bastards, the more that came the better. And now that they are not needed, what matter.

Yesterday, in re global warming and other problems, Bono and Gore spoke of incrementalism vs. real change. Do we need a government of compromise on the matter of global warming? Wealth distribution? Population?

[dirtyal]

At the risk of getting stoned over the emotional buttons this will push: Go back and read Das Kapital. Forget all the wacky stuff about the labor theory of value. Just read all the chapters that comment on child labor. In the mid 1800's everyone who cared about society was rejoicing because they had just passed laws that limited 6 year olds to not more than 14 hours a day of work int the factories. Kids had a life expectancy of about 12 years.

And, in thinking about it, this was not that unusual because kids who lived in rural society began to work at an early age and worked from dawn to dusk anyway. So, what's the difference between working all that time on a farm and working the same number of hours in a factory?

So, optimistically, we have "progressed" somewhat in 150 years. It's only the people in the third world who have to do this now. Nobody in the US or EU thinks child labor is good.

But, pessimistically, as other posters have already indicated, have we really learned that much in 150 years? With what we have at our disposal now in terms of drugs and technology, why are we withholding it from our fellow human beings in the name of free market capitalism.

PS--I am only interested in Marx from the standpoint of economic history. I really don't begin to subscribe to any of his other "ideas".

[Bob]

>> I really don't begin to subscribe to any of his (Marx) other "ideas".

Why not ?

Seems like he was pretty brilliant when he figured out long ago that capitalism would continuously mess up.

He's still right about that today.

And he actually tried to come up with an economic system that had a moral basis. Capitalism certainly can't claim that.

Russia couldn't get it to work but plenty of countrys couldn't get capitalism to work. I don't see too many capitalists saying "Capitalism is a failure cause it didn't work in country X".

[dirtyal]

Bob: Well, I think the idea of a "dictatorship of the proletariat" is just trading one set of self serving idealogues for another one.

I think "from each accrding to his ability to each according to his need" is one of those great ideals that philosophers have but that practical people can only dream about.

What I really meant about Marx and his ideas were the obsessive focus on the value of labor and the almost complete discounting of the value of land and capital.

For his time, he was a great social critic and he is discounted as a radical thinking memeber of the lunatic fringe too often. But I don't consider him that important of an economic thinker, more of a social thinker.

I can be convinced that I am being to dismissive.

[Curt Doolittle]

RE: "Russia couldn't get it to work but plenty of countries couldn't get capitalism to work."

If you go over there for a few months, it's working a lot better than it is in the west. The same is true in China and India, all of whom are abandoning communism, adopting capitalism, even with the disruption such adoption entails. They are abandoning democracy for the reasons plato warned us about. Near dicatorship over the process of implementing capitalism. Moscow and St Petersburg are explosively growing. One gleaming glass and steel, german designed, moscow artist decorated, towering example of capitalism followed by two filthy decaying brick tenements of the soviet era. Flat taxes and an educated populace who in no way want to return to the economy of the past.

Capitalism is a means of calculating the use and distribution of resources based upon people's willingness to act in favor of their preferences, while giving liberty to one's preferences, when the population and their preferences cannot be calculated by other means. It is not a political order, because it expressly says that we cannot know or understand what to do other than with the help of these tools of economic calculation. If further warns us that interference in it's process will train the populace to destructive ends. (Much as urban life does, and for similar reasons.)

The argument is not that socialism is not a moral objective(or the forcible redistribution of wealth that instead tends to concentrate over time and lead to mutually destructive revolution), the problem is that there is no way to calculate those preferences by other means than pricing and property with objective truth, accounting, money and adjudication of differences according to property.

Arguments to morality are specious given the consequences. Marxist thinking is the most murderously dangerous set of ideas since the invention of monotheism, and it's subsequent reliance on submission. (Inaction and ignorance.) Maxism is morally intentional, but immoral in result. Capitalism appears immoral, but yields, over time at least, a moral objective.

If one can find a way to make socialism possible in teh long run then it makes sense. But as of now, the jury appears to be in, and Mises was correct, and Marx just another religious fool, trying to institute the family structure on the greater order of human cooperation.

For a blog whose members are pondering such weighty subjects as political economy, the thought here is not absent good thinking, it is simply far to scarce for the import of the questions under consideration.

And yes, assuming time constraints, I am sure that is a defensible criticism.

Cheers

[Callahan]

Capitalist Pig does kind of hit home, dud'nt it?

says...

>> The same is true in China and India, all of whom are abandoning communism, adopting capitalism,

Now your not gonna tell me that they are doing this cause it helps the majority i hope.

No they are converting cause it will make the top fat cats fatter just like elsewhere.

I suggest you take a look at the life of the average factory worker that assembles Walmart crap.

Their lives are getting worse.

[Bob]

^ me

[hari]

It's a fundamental truth that American capitalism is the envy of the world! Or atleast it was until GWB came by....

The inherent socio-political problem arises when the "blue collar" worker notices how the "white collar" worker is treated on Wall Street - pensioned with a golden parachute in spite of their willful indulgence in dangerous or even illegal practices...(Enron!).

Economic history if full of evidence from bootleggers to oligapolistic/mercantile practices.... and rampant inflation!

What you want to avoid is polarizing public opinion to such an extend that the masses begin to think and believe that the economic system is fixed against them!

Deregulation started I suppose during the 1980s and became more or less a strategic part of gov policy in 1990s - lifting banking regulations and making capitalism free for ALL! It also advises us of the strength of K Street lobby!

Text books tell us differently that no system of state rule is possible without regulations - that's why we've red, yellow and green lights on highways!

[Bob]

>> Capitalism appears immoral, but yields, over time at least, a moral objective.

I already went over this.

Read "Poor KIds In A Rich Country".

We have a child poverty rate 10 times higher than in some of the European socialist countrys

Socialist countrys kiced americas butt in the "Best Place To Live Survey"

http://www.aarpmagazine.org/lifestyle/Articles/a2004-09-22-mag-global.html

The US came in number 13 out of 16 countrys.

[Bob]

>> It's a fundamental truth that American capitalism is the envy of the world!

See the "Best Place to Live Survey" in my previous post.

America was almost last.

[Curt Doolittle]

RE: "We have a child poverty rate 10 times higher than in some of the European socialist countrys"

Explain why. Where it exists and why. Among whom, and for what reason. Explain the differences in rate, and how those differences actually appear in practice. Explain the long term consequences of the causes.

I suspect that this is a number you HAVE SOUGHT OUT IN ORDER TO PROVE YOUR METAPHYSICS, not a statistic you actually understand. This is the error of evidence seeking. It is not the exhaustive search for data as an effort to disprove you theory.

The statistic is misleading. I will not say it is entirely false. I will say that it is false in practice.

[Holly W.]

Hari! Sometimes your comments are really interesting! But when you end every sentence with an exclamation point, I can't tell what you really mean to emphasize! Plus, it makes me feel breathless just reading it!

I don't mean to sound too critical here ... but sometimes a plain old period really does serve a useful purpose. :-)

says...

>> I suspect that this is a number you HAVE SOUGHT OUT IN ORDER TO PROVE YOUR METAPHYSICS, not a statistic you actually understand.

Kill the messenger eh.

What kind of "understanding" will reveal this to, in some insane way, not be a problem.

[Curt Doolittle]

RE: "Now your not gonna tell me that they are doing this cause it helps the majority i hope."

They are doing it because one quarter of the population lives on less than a dollar a day. They are doing it because they read books, failed to be able to build a sustainable economy, looked at how far behind they were falling. They are doing it because they got a good look at hong kong. They are doing it because their entire empire is built on the idea that china is the great civilizatoni and their tired of having a conflicting reality insult them on a daily basis. But most importantly, they are doing it because the are very close to having a revolution if they don't, and if they slow down or reverse, they are certain of it. They are doing it because they are converting millions of people every year out of decrepit poverty, and yes doing so while retaining power, because they know that civil war will follow if they don't.

Such complaints about life are simple and easy for the well fed, leisurely ignorant. That is a lesson from Veblen. It is a lesson from the skeptical phase of any civilization. (Toynbee, Durant, Spengler, Quigley.) Skepticism and criticism are not invention. They're an armchair fool's attempt to get attention by looking intelligent.

By your logic it would be better to keep everyone in poverty than build an advanced technological society. By your logic it is POSSIBLE to create such a society by other than capitalist means. You must posit some way of doing so that has not been refuted already both by reason and evidence.

What you instead could say, is that distribution of the disparity should be better adjusted, and the answer is they want to do that but because of the corruption that is endemic in that culture they can only do so at the rate they are. No society has undergone that level of change that well, with that little conflict, in history that I am aware of. This has largely to do with knowledge and technology brought into the country from the west, and rapidly implemented in a disasterously poor body of people who are not afflicted with dangerous mystical social orders, and where the body politic as high median IQ despite their poverty.

You an achieve this redistribution as long as you disallow immigration and control birth rates, and protect the money supply from dilution. Otherwise you cannot calculate it.

If you say "I want redistribution today" that's what revolutions do, and they destroy the means of production when they occur. If you say "I want redistribution over time" then thats what capitalism does by reducing prices and increasing production. You will get concentration of wealth no matter what. So you will have to sate your envy by some other means.

Cheers

[Bob]

^ me

[Bob]

>> They are doing it because ...

Yeah lots of rationalizations.

The fact still remains that life for the factory worker is hardly any better. Maybe even worse than when they were on the land.

It's making the country unstable just like it was under their version of communism with the exception that maybe you have a bigger slice of elites.

[Curt Doolittle]

RE: "Kill the messenger eh."

I was not creating an ad hominem, but pointing out the obvoius failure in your logic, and pointing you to the probable reason for the failure in your logic. That is not an ad hominem since the motivation is immaterial to the criticism of your logic. On the other hand, attempting to CAST it as an ad hominem, is an attempt at the error of Distraction. In the end, you either can defend your reasoning or not. It appears not. I return to my criticism that you cannot defend the satistic upon which you rest your argument. I suspect that you are attempting to distract from it because you cannot defend it. If you cannot defend it then my stipulation that you are evidence seeking rather than answer seeking is true and that simply confirms the point you seek to cast as an ad hominem.

The economic answers are out there. Just as devotees of religion or newtonian mechanics or the hand of god were disappointed when confronted with the error of their theories, it is disappointing to socialists to be confronted with their failures. If you do not like capitalism's solution to the problem of calculation then the answer is to solve it by another means. You can seek to prove your god is real, but will succeed no more than do the fundamentalists. There is an answer, it will redistribute wealth, it is sustainable. But it is not in the direcxtion that you seek, which is to reinstitute the values of the agrarian family and village, or urban peasant, but instead to create institutions that assist people in insuring each other while maintaining calculation. No solution will stop the concentration of wealth. So again, you must sate your envy by conquering it, not by making it impossible for others to get the attention you yourself desire.

Cheers

[Curt Doolittle]

RE: "The fact still remains that life for the factory worker is hardly any better. Maybe even worse than when they were on the land."

Prove this statement somehow. If the people choose to work in factories rather than farms, then how can that be true? By what metrics can you make that assertion? If they choose to have electricity, sanitation, a television, a heated apartment, and prefer the factory work to the soil, how is it not better?

Moreover, state how we can do something better? How would it be implemented? How managed?

I can argue that levitation is better than walking. The problem is, that neither of us can levitate.

To argue against the state of a thing is foolish unless you are arguing for the METHOD of changing the state of it. The alternative is just the prattle of a knitting circle.

[hari]

Holly W - Thanks!

[Patricia Shannon]

Curt, you keep telling people to "prove" their statements, but I don't see you "proving" yours.

[dirtyal]

Bob and Curt: Your discussion is stimulating. But it reminds me of the Dylan line "don't speak too soon, for the wheel still it spins". All we can see right now, in my view, is points on a graph. We can't see the whole trend. I am not sure we will be able to see the trend during our lifetimes.

We know that there are lots and lots of people in China who don't have it any better than they did when Chairman Mao walked the earth. That was pretty bad for a lot of people. Maybe the good thing, at least from the standpoint of random observation, is that the state is not trying as hard to control the minutae of peoples' lives.

But there's a lot of optimism in the cities and people are trying to better their lives. And lots of them are going to school and succeeding, at least compared to their parents and grandparents.

It seems as if the people who are "making it" are doing so by capitalistic means rather than by state controlled business. But there is still lots of state control and, as the mystery poster observes:

"they are converting cause it will make the top fat cats fatter just like elsewhere."

But it's still a work in progress and I am not sure we can really devine how it's going to turn out.

[agricanto]

>This is not a failure of capitalism. It is a failure of government to administer the problem that they created by interfering with capitalism<

Only in that the Fed was party to the scam of subprime lending. But regardles of what anti-guvmint ideologues say, the problem comes from insufficient regulation and federal gov passivity to market disaster based on ideology.

That ideology will be with us as long as religious fundamentalism is with us. They have much in common, always placing scripture above experience and theory above empirical facts. Funny, Marxists used to be that way (when they had a captive market); now it's the neo-classical fundies that want us all to hold our breath until the second coming. Turning blue here.

If we have a free society, we should unshackle our brains from ideology and think things anew with a fresh view toward major systemic change. China seems to have done that. We have a political system in our Constitution, not an economic system. If used as directed it can relieve pain and provide a healthy therapy to the sick nation. Or we can let it rot while our leaders walk all over it.

[paine]

"The more people that have advance skills...."
the less corporations have to pay for their services

wake up laff
it ain't about most americans
making themselves above global average

red queen rubes get phd's too

[paine]

"Go back and read Das Kapital. Forget all the wacky stuff about the labor theory of value. Just read all the chapters that comment on child labor"

at the time karl himself was given that advice
jump right to the working day and go from there to
the laws of motion and end with primal accumulation

he didn't listen

btw the labor theory of value
was orthodox econ con
circa 1845-1870
and had been around since bill petty in the 17th century

marx felt he added a coherent theory of surplus value
the key
his distinction between labor and labor power
but enough high priest gesticulating for now ...

just target surplus value theory
next time your cruisin'
the early pages of kapital I
on a routine bomb run

[paine]

mark t
you never fail to surprise me
nice post

the center of your mind
is well grounded in every day reality

[paine]

here's a line that contains much compressed wisdom

"... he (km)figured out long ago
that capitalism would continuously mess up"

i can't add anything to that

[paine]

"from each accrding to his ability to each according to his need"

that's not marx comrade
that's utopian speak of an older vintage

read his notes on the gotha platform
you'll find this maxim

"from each according to his ability to each according to his .....WORK "

[paine]

CURT
"Capitalism is a means of calculating the use and distribution of resources based upon people's willingness to act in favor of their preferences, while giving liberty to one's preferences, when the population and their preferences cannot be calculated by other means"

thats not a bad definition of a market based production system
but capitalism is a sub set of that
where the prime producers work for wages
and produce a surplus captured by the owners of the production system and not passed thru to consumers

the capitalist system is guided controled and owned
by those trying to maximize
the appropriated difference between those wages
and the value added by the wage workers productive labor

hows that for starchy prose

[paine]

"there is no way to calculate those preferences by other means than pricing and property with objective truth, accounting, money and adjudication of differences according to property."

the train wreck here is funny
alls well thru the first tunnel

"there is no way to calculate those preferences by other means than pricing ..."
no one doubts the unique role markets can play

but what in hell meaneth dizzz
"and property with objective truth.."
not even adding
"accounting and money " helps us

but then we settled back to freshly minted banality

"....and adjudication of differences according to property (rights ?)"

ahh the coase cellllebre of chicago
and the mid century alps

[agricanto]

Dang this is so much fun. It's MUCH better than all the seminars I had in grad school. And it's nice to see people argue Karl Marx with quotes and references and even a decent lot of knowledge. I guess the WSJ was right in 1994 when they put Karl Marx on the front page and called him (in a "fair and balanced" article) one of the great economic minds in history. They featured 3 great classical economists and Marx was their first one!

It's Marx's critical appraisal of capitalism that makes his observations so compelling even today, not his 19th century dictums or slides into Utopianism. Take C-M-C and M-C-M(*) as the two circuits of capital. We all don't start the day the same way. At the end of my day I don't have mo munnie, I have mo' stuff (sometimes). But "they" end their day with (much?) mo' munnie. Cash hasn't looked the same to me since. But ideology makes us all blind to the difference.

Policy debates on what the big, bad guvmint should do are really about restoring some order to M-C-M by giving C-M-C a little mo M. But guvmint will not order the M-C-M circuit by regulating C. That is heresy and sacrilege in our economic system.

* C-M-C commodities-money-commodities ("us")
M-C-M money-commodities-money ("them")

[TigerPaw]

With regards Hari's comment that the world envy's the US system - there are millions of us that do NOT.

There are pluses to the system, yes. But there are a lot of minuses as well. Unfortunately some seem blind to this fact and insist that all is well while the ocean liner is taking on water.

[dirtyal]

OK Payne, I have to admit that I have not read the Communist Manifesto since the 60's and that I only read it because it was required reading in my class. And I only read the exerpts from Das Kapital that were in my econ book. But I read all of Das Kapital about two months ago when I was on a boat going from Lisbon to St. Thomas and had some time on my hands.

I believe, but can be taught, that "from each according to his ability to each according to his work" was an interim stage when the ditatorship of the proletariat had taken over but before the system had been truly perfected.

Then, when the true Communist system was fully installed, it would then be "from each according to his ability to each according to his need".

I have to say that I was a pretty rabid classical conservative at the time and all the Communism stuff seemed to me to be pretty crazy. It still does, but I have to say that when you understand what Marx was really railing against it made lots more sense. It's a lot like what we are doing today, comparing and contrasting the actions of our "leader of the free world" with the views of others.

I am not a Marx scholar by any means, but I did take two Economic History classes from a true Marxian exonomist at Berkeley in the 60's and I did read most of Das Kapital, at least an English abridged edition.

[Craig Nelson]

Golly, what a collision of differing world views and different views of discourse. And differing writing and reading skills.

[paine]

dirtyal
between phase one "according to work"
and phase two "according to need"
much sublation must transpire

maybe more then any one
oughta figure he/she can grasp

lets take it one stage at a time
"according to work"
surely ain't utopian
now is it

[paine]

" I read all of Das Kapital about two months ago when I was on a boat going from Lisbon to St. Thomas "

god bless you and keep you my son

[paine]

"a true Marxian exonomist at Berkeley "

who ....might i ask

[Curt Doolittle]

RE: "ahh the coase cellllebre of chicago "

Ridicule is not an argument. It is, quite the opposite: an acknowledgement that one possesses no argument.

Keep trying.

[paine]

curt
you are a teddy bear

read and report back on the greenwald stiglitz theorem

[paine]

gordon nice comment
as are many here
i might suggest the devilish
modern hi fi system if abolished
would spring anew
from the head of corporate industrial capital

the very structure of profit extraction
its very deepest mtions and motives
produce an eternal basis for
the re emergence
of huge financial elaborations above it

[Lafayette]

km: Yesterday, in re global warming and other problems, Bono and Gore spoke of incrementalism vs. real change. Do we need a government of compromise on the matter of global warming? Wealth distribution? Population?

Governments do not run revolutions (on their own territory). They bring about evolutionary change because the revolutionary kind is far too radical to effect without serious disruption of the economy.

You want 30% unemployment overnight? Just close all coal burning electricity generating plants in America from one day to the next.

Besides, a nuclear generating plant is not built in a year. It takes at least five-years for it to come on-line. But, first, one needs the commitment to build them. And, the government must take the first step by convincing states to contract Private Enterprise to build them. All that requires funding or regulatory inducements.

One way or the other, the tax payer must assume the cost both of building and operating the plants. Raising present "dirty-energy" costs by means of a carbon tax is just one such inducement that works. It makes Nuclear Energy more attractive an option.

All that is not an easy process. Bono wouldn't know that -- but I would have given Gore more credit for knowing it. Apparently he doesn't, if the above comment cited is correct.

[Lafayette]

dirtyal: Then, when the true Communist system was fully installed, it would then be "from each according to his ability to each according to his need".

Less was not more

No true Communist system was ever installed. Marx never espoused that any group would steal power and submit the rest to Communist ideology. It was supposed to work "naturally", that people would understand his arguments and agree happily to adopt its ideology.

The dogmatists thought otherwise. First Lenin, then Trotsky rebelled, and finally Stalin imposed his rigid rule of dogmatism.

What remains to Marxism is the Socialism With A Human Face (a phrase used by Dubçek in Czechoslovakia before he was brutally overthrown by the Soviet Union). A number of European countries, that maintain Communist Parties, still espouse to this softer version of Socialism (of which Communism is a subset).

Communists don't do well in European politics nowadays, but they are still there where/when it counts. The most radical of French unions (the CGT) is Communist and despite the fact that they represent barely 10% of the workforce, when they strike the nation takes notice. So, their media leverage is far greater than their numbers.

The European "cocooning", brought about by common market tariff barriers that came down in the 1990s, is frazzled at the edges. The continually strident political calls for more and more and more by the Idiot Left were doomed in the face of diminishing tax receipts base. Less was not more.

As French President Sarkozy said to his countrymen, who are still expecting "more", the coffers are empty after fifteen years of unwillingness to face facts. The state cannot do everything.

But, I hasten to add, America is NOT Europe. It is coming from an entirely different direction, where -- if the state coffers are empty -- it is certainly not from giving more to the poor, but to the rich. It is due to tax rate insanity, first started by the Republicans but never corrected by the Dems during their 8-year stint.

One must ask why? Just chance? Bullsh*t. It was amply foreseen that the Wealth Shift would be from the Middle Class to the Upper Class. For once, economists got a forecast dead right.

What to do about? Easy answer: Reinstate the pre-Reagan marginal taxation rates. And, if America has any real courage whatsoever, institute a cap on ALL INCOME. (Decide what is too much annually ... 10M-bucks, 20, 30, 100? But decide.)

Never in our wildest fantasies did we ever thinkthat colossal fortunes could be made. But, they can. And, let's not believe the simplistic notion that because they CAN be earned that they SHOULD be earned. That is what Income Inequality or Social Fairness is all about -- if you care to believe in it.

And, don't let a bedazzling hi-tech nerd in Davos with his 300M-buck gift to Africa/Asian farming make you think that Creative-Capitalist philanthropy sets the balance right. It doesn't.

PS: Do I believe America is ready for Income Equality? Not for a moment. The Dems talk about it, but the problem is that most of the 370 million Americans believe the American Dream. That one day, they too can be as rich as Croesus. Doing away with the American Dream would be tantamount to saying that "God does not exist". We can't have that, can we.

[Bob]

Patricia

>> Curt, you keep telling people to "prove" their statements, but I don't see you "proving" yours.

Thank you.

This is the second time you have come to my assistance and i would just like to let you know that i don't forget.

Good luck on your music and and remember to never compromise it for money.

[Curt Doolittle]

RE: "but capitalism is a sub set of that where the prime producers work for wages and produce a surplus captured by the owners of the production system and not passed thru to consumers"

This approach is not only a restatement of the labor theory of value, it also includes the error of static demand, ignores the problem of variant resources, assumes knowledge over preference (a totalitarianism of preferences), and attributes to such owners a durability that is simply not rational, nor in evidence, except perhaps in the eighteenth century and then only marginally so under the sponsorship of states, and actually is inversely so under debt expansionist capitalism. (Which, if you make that previous statement, it is improbable that you understand.)

I am trying to see if someone sufficiently knowledgeable will enter this debate. We all agree on the desired outcome. The question is the method of doing so. Such debates as this are more useful for viewers than participants, and we cannot get to an answer without many days of repartee, because those who I debate against lack the knowledge to do so. (Yes I am baiting. It is a technique that works well in competition in that in maintains the crowds interest - but it has five thousand years of precedent.)

If you want to achieve equal human value, this is simply not possible. Egos cannot be assuaged. We are not equal in any material way, in that we are unequal in our temporal value to others. (That is unless you say there is some divine measure of equality.) So if you wish to solve the problem of getting people on the left of the curve to enjoy the accolades of others then that is not going to happen. (It would be destructive to the information system we rely upon for imitation - one of the problems in the submissive mystical cultures.)

If instead, it's not the ego problem that you want to solve, but the material one, you want to redistribute MORE of the productive result of human cooperation, MORE QUICKLY than the previously tried options:
1) productive control, overbreeding and collapse of production
2) overbreeding and revolution and collapse of production,
3) undistributed capitalism, concentration and revolution and collapse,
4) redistributed capitalism, temporal concentration, intertemporal redistribution, overbreeding, immigration, destruction of the knowledge economy,
5) redistributed capitalism, temporal concentration, intertemporal redistribution, controlled breeding, controlled immigration, and maintenance of the knowledge economy
...then that is possible through the use of institutions as long as those institutions are not open to the process of human verbal or written appeal (political).

Like Anna Karinenna, all families that are healthy are the same, all that are unhealthy are different. Economic coordination, assuming our egalitarian end, is a function of many properties functioning together. Most all of these mandate the capitalist system simply for calculative reasons. The one axis a political order can always attempt to improve on is the TEMPORAL AXIS of redistribution. Given that the trade of goods is the only point at which you know your production was not a waste of resources.

Marx attempted to make compensation a Propter-Hoc process, rather than narrow the Post-Hoc process. This may be to vast a series of concepts to grasp, but it is the essential part of the problem: maintaining the knowldge problem in all it's dimensions while redistributing the results of the act of VALUE CREATION rather than of PRODUCTION, which we do not know if was useful until completing the trades that tell us so.

Likewise the debate should be over finding the minimum temporal differential for redistribution that preserves the knowledge system. By this debate we can avoid, at least in part, the debate between those who work hard to gain rewards (material, social and emotional) and those who are less fortunate by virtue of birth, while still demanding productive conformity from those who are less ambitious. There is not free ride in the reduction of prices. We either universally assist in that process or those who opt out of it are less comforted by it.

Marx is an abject failure. Marxists are an abject failure: cute, like egoistic young adults, and nothing more. He is a data point on an axis in the development of western civilization where the nobility had surrendered political control to the middle class, and created vast increases in the standard of living, and finally, the peasantry, now enabled by decreasing prices but unable to control their breeding, sought to take political power. This cycle is endemic to all civilizations (per Quigley/Toynbee/Durant/Spengler) and there is nothing new. His argument at this point in time simply attempts to be scientific and spiritual rather than simply spiritual.

It appears that redistribution can in fact be made possible by decreasingly intertemporal means (although not infinitely so), and therefore his DESIRE may still be met, but, his extension of the patriarchal decision making of the family, tribe and ghetto is not the mechanism for it. Because these are knowledge problems and decision frameworks for small numbers of people with similar resources preferences and knowledge, and a tribal leadership.

But that was simply his ignorance and foolishness, essentially trying to expand the logic of his ghetto family structure to the extended order, about which he knew or understood nothing, and by any means of analysis he failed to gain an understanding of, and had to beg his way thru life as evidence of it. This is true of most of the great monotheistic submission-spreading prophets, who have driven vast numbers of the populace into intellectual comfort of surrender, and resultant millenial poverty, while other civilizations into the intellectual challenge of self improvement, and the material result that comes from it. Max is simply an heir of zoroaster, with another scripture. All of us would like to abandon the need to constantly manage resources but it is that effort that keeps six billion of us alive.

Or, put more simply, for the more pedestrian, there is a parable of the boiling frog. In this parable, a frog is put in a pot of water and the heat slowly applied. The frog supposedly boils because he cannot sense the gradual change in temperature. Likewise, a man who beggars for his supper is highly insensitive to gradual changes heat, only to it's spikes and falls, and him that has a years salary in savings is more sensitive to gradual change, precisely because his sensitivity to time has allowed him to be. The longer out memories (the more we know history) and the longer our desired outcomes (production rather than consumption) the more human we are, and less so frogs.

Time has the same affect: the poor man cannot feel the increase because he is so sensitive to daily values. This is a function of his egoistic ignorance, as well as his absence of resources - but not one OR the other (the common mistake). The less fearful man is so precisely because he seeks the increase in value over time. If you say, we should reduce the risk of the poorer man so that he can develop that ability to look to the longer trend, then that is wise. If you instead, seek to burden the wealthier man, so that they poorer man, need not do so, then that is neither wise nor fair in any sense. It is also dangerous in that one will want to kill the other as history has proven.

That is the grad course you need to study, not the one sold by mediocre acolytes of either end of the spectrum. An argument to "should" is not an argument to necessity. Only by reducing the argument to one of necessity can we compell people to a rational answer which is the purpose of politics. Irrational answers are the purpose of religion.

Evidence-seeking is what religions and mysticism rely upon, as do charlatans and snake oil salesmen. Rational and scientific methods seek to construct theories which we seek to disprove, evolving our knowledge in the process. (Popper, TLSD 1932)

Too many ideas here for such a forum.

Cheers

[Curt Doolittle]

>This is not a failure of capitalism. It is a failure of government to administer the problem that they created by interfering with capitalism>>Only in that the Fed was party to the scam of subprime lending. But regardles of what anti-guvmint ideologues say, the problem comes from insufficient regulation and federal gov passivity to market disaster based on ideology.

The problem comes
a) from the use of the redistribution channel. in other words, teh attempt to print money and redistribute it through flooding the system with capital.
b) failure to regulate it
So I agree with you on the cause of the problem. You ascribe it to ideology. I ascribe it to a century of foolishness inspired by Marx and Keynes. Cause of inspiration aside, the problem is A and B, not one or the other.

Cheers

[Curt Doolittle]

re: "Curt, you keep telling people to "prove" their statements, but I don't see you "proving" yours."

a) Point me to one I am not proving. (I susupect you simply do not understand whats being said.)
b) I have only pointed to two. Both of which are facts without supporting theories (you cannot have a fact without a theory). In other words, they are using evidence seeking rather than argument.
c) I am using theory to support my positions which must be countered by a theory, and finally by facts that support that theory and are open to criticism. This is how one casts an argument. Lao Tzu and Aesop are the first scholars to use mythical evidenciary stories (similar to what you're using as "facts",) as a means of argument. But we have dismissed these as children's stories capable of teaching general principles. (They are pedagogical if true) But they are not arguments, and they must be proven true and part of a theory before they can be so.
d) appealing to the crowd is an acknowledgement of the failure of one's argument. (Not that you're actually making one.) Truth is not a populist concept. In fact, there are few arguments that need be made where the vox populi is material. In fact, it is what grade schooler's do when they say "Right Mary-Jo?" as if another opinion has some merit.

I realize this is not a scholarly site peopled by any particular wisdom, but you should attempt to do somewhat better if you wish to ponder such weighty subjects as the politics and economics of our very survival.

[Curt Doolittle]

RE: "read and report back on the greenwald stiglitz theorem"

I don't know which subject you want me to tackle?

Stiglitz correctly identifies the world bank problem. He is correct (at least mathematically) regarding the information problem. The disagreement is whether the government should make these adjustments or whether we should put institutions insulated from the political process in place. I have no interest in empowering governments, the bigger they get the more warlike. Federalist papers number ten makes the argument that no state should exist beyond the boundaries of people with similar economic interests unless you eventually want to either enslave people or go to war. I don't see anything outside of that. Political instuttions are still bound by the knowledge problem. Market institutions are not. I do not argue about the end. I argue about the means.

Debate on Stiglitz is widespread and far from uniform. He is a poster child for the decrease in meaning of the Nobel prize and it's converstion to a political rather than scientific award, and among mathematicians and philosophers highly questionable as to "what those mathematics actually describe". (Mathematics being static and descriptive not causal and evolutionary.).

His argument against the world bank is legitimate but I don't know of anyone who really disagrees that no matter how we structure charity, (profitable or not) we are disruptive to the development of sustainable economies outside of older cultures. But these are organizational and knoweldge problems and still, the market combined with eduction seem to be pedogogically superior.

Cheers

[Curt Doolittle]

"See the "Best Place to Live Survey" in my previous post."

This is an ice-cream flavor test. The only measure of any meaning in this case is income-level-migration. This tells what govt policies affect what demographic. (Denmark cannot tax it's young workers because all the high potentials move to other countries and return when they are older for example, having stored their wealth in non-Danish banks.) Quality of life depends on what income-knowldge bracket moves between countries. This is how to analyze this particular topic.

Again, you are using evidence-seeking to justify your religion rather than testing the viability of your religion by seeking contrary evidence.

Cheers

[STS]

curt:

"the attempt to print money and redistribute it through flooding the system with capital"

It seems you are tracing the root cause of our trouble to the "attempt to print money" -- for which I see no alternative. Even gold is available in unpredictable quantity and "hard money" invariably has to be supplemented by credit. There is just no such thing as a completely rigid money supply. Nor is it desirable -- the monetarist ideal would probably be a money supply which grows in lock step with the economy (I see some problems of definition and measurement even with that ideal, however).

Certainly money-credit supply is a critical variable and modern banking is dynamically unstable -- rather the way a stealth fighter would flip over and crash without constant adjustments to trim which only a computer can manage. I sympathize with the view that "it's all too d&*n complicated." But is there in fact an alternative system with dynamics which spontaneously pull us towards a stable equilibrium?

Or perhaps your objection is the "redistribute it" part? Surely subprime credit (NINJA loans for example) could be construed as "redistributive." I'm against those because I think bad incentives in the current system encouraged people to do the impossible: help people "afford" houses they simply could not. But this is a matter of drawing lines, and penalizing those who cross them. I don't think abolishing "lending" across the board would be particularly intelligent, useful or effective -- nor would it be "libertarian." In fact the libertarian argument is that of course people should have been doing these loans. Every step along the way from origination to MBS to CDO to CDO squared, etc. was a voluntary exchange between consenting adults. So what if it causes a debt bubble implosion? What is the public interest anyway, and who speaks for it?

I'm just not clear on how much of the banking system you want to eliminate in pursuit of a solution here. Your argument seems primarily negative: just do less and all with be well. It's probably true that no one has resorted to a *completely* faith-based reliance on no government intervention, but that has to do with human nature. A power vacuum will attract people who don't share your delicate sensibilities. It takes strong walls to contain a vacuum. Where would you like them to be?

[paine]

curt
you need to gobble greenwald stiglitz theorem
its fairly central to a discussion
of market spontaneity the state and social welfare

the coase conjecture on private property
is just another notion ping ponged by ideologians
of the logical positivist free market cult
formally
defeated by a seriously "non convex " reality

[Curt Doolittle]

Paine-

You are not making an argument, but an appeal to authority. Partly because, I suspect, you actually do not understand the argument you refer to.

The S/G theorem is about the failure of market prices to sufficiently convey information about equilibriums. This is a static knowledge problem. It is a convenient argument because it ignores the necessary forces of disequilibrium in the exploratory process. (Innovation) On the scale that he is dealing with (the IMF) there is logic to it. but on the multi-dimensional scale, IT SIMPLY MOVES THE HAZARD AND ERROR. This is a time problem.

If instead, you state that the IMF is misguided due to the fact that it focuses on inflation (which is a low delta technique inapplicable to developing economies) and that the IMF and credit system are dangerous or predatory to developing economies, I see this simply as an error in application of a technique to a problem, because both the technique and problem are not well understood. This is not to say that the problem can be better solved by the means he proposes.

You would not make the arguments you do if you actually undestood the problem with these different theories. you may argue that you HAVE A PREFERENCE for satisfying current human wants quickly and ignoring the later impact in the hope that we have the knowledge to correct the problems we make. You might argue that we should use the stress of human wants to teach societies how to be productive ones. You might make many preferential arguments. We would then need to discuss the logic of those preferences.

Efficient equilibriums may or may not be something we should strive for. From the perspective of the participants, the apparent NOISE created by our explorations is not noise and is not inefficient: it is the cost of educating ourselves, and doing our best to hand down this pedagogical information to following generations. People want to be free of this process, just as they want to be free of staying physically fit. That does not mean it is good for them. Everyone wishes to live in the land where their parents still support and take care of them so that they can focus on themselves rather that strive to understand how to serve the needs of others.

If you want to state that there are functoins that cannot be served by the market process because of incentive differences (scientific exploration) then no one really aruges with that. It is prescriptive choice making that is the problem, becuase it deprives people of the pedagogical service, despite the fact that they do not want it. We all seek to avoid it, just as we seek to avoid all forms of physical and mental discipline.

In this sense, providing each other with insurance is one thing. Providing a means of dispute resolutoin another. Providing each other with the funding necessary to acquire non-market skills (basic education) is yet another. Beyond that, all else is a moral hazard because it is an economic hazard. As such S/G are correct in that our interferences due to our focus on controling the rate of growth were errors. We simply provide them with disinformation. Instead, we should give them the institutions that they need that assist in the formation of calculative ability, and the pedagogical services provided by those institutions and pedagogy.

And while we're at it, we should fix our own. But we can do neither while S/G and other socialists attempt to replace market institutions with political decision makers. I am OK with this as long as we destroy nation states and move back to petty 18th century germanic kingdoms.

Cheers

[paine]

curt i sent you an e mail
on this
in brief and to be polite
seems
you haven't quite got the gs theorem down pat
we can converse on this privately

"The S/G theorem is about the failure of market prices to sufficiently convey information about equilibriums."

its about sub optimal pareto improveable
results of free markets
given certain"realistic "assumptions"
not modeled by arrow et al

"This is a static knowledge problem "

as are you my friend
but like you its unfortunately dynamically
quasi stable

ever bite a puck thinking it a moon pie ???

[paine]

btw
curt
why the tick on the wb and imf
globe izery and its discontents
is not stiglitz en masse let alone in totto
but only performing on one popular stage

read the journal papers
greenwald stiglitz
sappington stiglitz
arnott stiglitz dixit stiglitz
second name in each
but first mind in all

[paine]

" I am OK with this as long as we destroy nation states and move back to petty 18th century germanic kingdoms."

a h/o gage nostalgia....
you're quite the romantic

to keen for
a pre bismark not to say
pre hitler germany

kropotkin's evil right handed twin.... eh ???
'

[paine]

curt
you bring to my mind's nose
the bracing smell
of model airplane glue

[Curt Doolittle]

STS-

Fist, thank you for the cogent reply:

You ask
a) what institutions do you propose then, because your argument is primarily negative?
b) what do we do with banking

We all have different preferences based largely on our personal experiences and the necessary limits of our knowledge. My preference is to sustain the productive capacity of a civilization for as long as possible, just as much to help people live well, as to prevent what appears to happen when the economic order fails. I see the ups and downs of our lives as tolerable, compared to the great upheavals caused by the destruction of money and boom and bust, and more so than the fall of civilizations. Our order is an anomaly, the greatest social transformation since the development of farming, and just as painful a transition. The rise of an urban dependent poor instead of an urban poor, as the majority population on the planet is something I do not think we understand. So, I see civilization and the prosperity we live under as a fragile perishable and the sacrifices necessary to maintain it worthy ones. Again, one might have a preference, but the logic I employ supports that preference. I think each of us primarily errs in that we argue for the process of achieving different preferences, instead of arguing for the relative merit of those preferences. Or better, allowing each other to pursue our preferences without asking others to sacrifice theirs for our preferences. It particularly avoids the democratic trap of having a large demographic attempt to use the political process to take control of the assets of others.

Governments cannot know what prescriptive actions to take. Only what punishments to mete. Systemic Redistribution should be limited to insurance and borrowing schemes - shades of Rothbard perhaps.(Charity not withstanding) The money supply should be as restricted as possible. (I disagree with your gold argument but for other reasons.) Bankers should be in charge of printing money, not the fed, and that money should be regulated by type of dilution. (So as not to create in the money system the same problem we are seeing in the current credit system: invisible risk. I like this in particular because the working class have the greatest incentive to push the society to mitigate risk.) Insurance mandatory - health, retirement, unemployment. Taxes should be fixed on income and no law made to alter them. Disruptive taxes should be banned. No taxes on savings. mandatory retirement savings. Unlimited borrowing for education regulated only by willingness to pay. Immigration must be limited to those who can buy their way in by coming with assets (instead of subsidizing businesses with cheap labor at public expense). Political efforts in this context become largely those to influence others in the demographic rather than choosing politicians. Political debate becomes largely about the use of charity. Ostacization is still possible.

I do not want to eliminate public political debate, just the ability to use the money system for political coercion. I cannot claim to support any current philosopher. However, I am convinced of the problem of economic calculation, and the limited ability for humans to intentionally equilibrate social orders without creating a greater problem than they attempt to solve. At least intertemporally.

We have not yet solved the problem of induction. I leave open the possibility that when and if we do, I would change my position, because this problem is the reason we cannot more rationally come to an agreed upon solution. I simply think that it is a very, very hard problem to solve. It is by far the hardest problem we can solve that I know of.

Maybe too much for here, but that is, in sketch, in brief, the answer you requested.

Cheers

[Curt Doolittle]

paine

Ridicule is not an argument. It is the acknowledgement that one lacks and argument. Either enter the ring or simply admit that you're not up to it.

There is a reason that through most of history ridicule has been seen as justfying a violent response. That is, becaues the public debate is only honest and moral, and thus free speech a right one is granted, if and only if it is rational. And in case you can't see to the subtlety, I am calling you not only ignorant, not only a fool, but a coward.

Put forth an argument if you have one.

Cheers

[Curt Doolittle]

Paine

"you're wishing away too manyco ordination problems only the hierarchy of a complusory organization can resolve whether corporate or otherwise state run or state inspired and dictated free rider third party etc etc these are not resolved voluntarily by flat systems"

What you mean is that you you want to use a command coordination system (dictatorship) to affect the change that you desire more quickly, regardless of the long term effects of such things. THis is the fancy of all dictators.

The rest of your email relies upon this assumption. In effect you are arguing with me about preferences and accusing me of not understanding a truth and your preference is not a truth, but a preference. Your view of efficiency is something that you should scrutinize.

Furthermore you seem not to understand the boundaries of mathematical inquiry, and dismiss your understanding and mine in such a way that this well known problem should not be considered. A convenient way of discarding credible criticism is it not.

You accuse me of failing to understand the underlying problems. I may in fact, hold a preference you disagree with but it is a matter of preference. I am willing to let you pursue yours, and expect the same in return. But I suspect that this is counter to your preference. You are simply jusfitying your preference at the expense of mine.

For example:
"the existence of an exploited class is the basis for "the state " -----look to its historic origins 10k years ago or so"

This is a foolish statement. The population outstripped the knowledge distribution and the tools for calculation. Celts corrected this by disallowing power accumulation. Babylonians exacerbated it. This problem is why they invented monotheistic religion: becuase they had no other system of coordination. The Brit's did it with property, law and accounting. Not sure it's as fulfilling, but it is a bit more precise. Like any innovation it takes time to equilibrate. In other words, you must go back in time and determine how to find an alternative path, rather than ascribe to that history, knowledge which then did not exist and thereby lay a false criticism. If that is your criticism, you must lay out how it should better function.

And more:
"silly he won for his inovative formal models-- like dixit stiglitzimperfect comp model---that are used by all academically "trained " economists"

Of course, you further illustrate your lack of understanding. You mean, those economists who use the formal model of equilibrium theory. You further call upon the popularity of something as the measure of it's truth. you ignore the problems of the mathematical limits, and you ignore the problem of the limited descriptive power of the equilibrium model. You ignore the disequilibrum effect of innovation, or the priority of innovation over equilibrium. You state this set of ideas as if economists have predictive capacity which is the virtue you want to empower governments with, and the preference you advocate. But these people and models, they have EXPLANATORY capacity, using these two tools, but not PREDICTIVE capacity. Your logic is both circular AND faulty.

You are an unarmed opponent, yet you accuse me of an inabilty to cast Thor's hammer. I may not cast if far as far as Hayek, but at least I can lift it.

Cheers

[Lafayette]

CD: I am trying to see if someone sufficiently knowledgeable will enter this debate.

Try being a bit less literary ... ? If you want answers, you have to ask questions -- not lecture.

Blogs are not great for debate. It is hard enough following a thread that meanders all over the place. Once upon a time, one could pick a particular comment and devolve a debate thread from it. That can't be done in blogs, which is, actually, a quite rudimentary correspondence mechanism.

One must be succinct and, believe me, I know how hard that is. I can't do it either. But, that IS the challenge.

[Curt Doolittle]

Lafeyette:

" Blogs are not great for debate. "

Just as an excercise, what is the effect of reducing debate to comfortable patter? In other words, blogs have become the primary forum for public debate. What will happen if this continues? We do not live in little new england communities meeting on Sunday, standing in turn for orchestrated debate among people of marginally different faiths, because we could not afford our own churches - a problem which created some great men and great minds. Today, we can all afford our own churches, our own communities of interest, and afford to people them with those of our own faith, and reinforce our existing ignorance. Arguments of substance, about substantial issues, particularly those of political economy cannot be held in the common patois. No forum of construct is excellent for debate except perhaps a ringside view of a small state's senate. We must make do, even if blogs are the equivalent of shouting across rivers in the rain.

I am aware of my problem with literary density, and decades of working to improve it have only helped moderately. (Spinoza:"one should endeavor to speak in means comprehensible to the common people.") In this case, met with ridicule rather than argument, (which is the primary technique of collectivists throughout history, second only to populist appeal) the only avenue available was the one I took. It is the same one Socrates used, and is just as tedious.

Thank you none the less.

[Lafayette]

CD: Arguments of substance, about substantial issues, particularly those of political economy cannot be held in the common patois.

People wanting to vent

Sorry, but I feel that attitude quite wrong. They have to be "common". Or, blogs just wont work.

Let's face it, the American dialect (of English) is not that well developed for proper debate. In fact, the Brits figure that Yanks employ about 60% of "their" language to express themselves. The vernacular of English is American, whilst English is, uh, English. Just ask any Englishman about the language employed by "their cousins across the pond" ...

Still, without appearing linguistically highminded, one can have valuable exchanges, if one tries hard. The Socratic method is best; make your argument by posing questions or seem to.

Only problem is, around here, don't expect an answer. Blogs have become cathartic implements. People wanting to vent, post on a blog. Damn few are here to debate, they just want to be read.

Debate is hard, mind you. One must stick to a single subject and there's a great deal of to and fro. And, one must WANT to debate, that is pursue an exchange on one common subject. Not stray at the first whimsy. That requires monitoring, which blogs do not employ.

In fact, if you want to see real debate, then go to the Economist which is currently putting them on regarding particular subjects (that are not necessarily of any real interest to the ordinary person).

I have said before and I maintain still, the blogosphere is somewhat proletariat -- because its access is free. Ask a fee and watch half the posters here go ... elsewhere.

A fee-paid forum would sift the wheat from the chaff, but it would need to be far more robust than an ordinary blog in terms of its facility in linking to external sources and graphics in order to argue well a subject.

And, frankly, I wonder seriously if a fee-paid debate forum would pay its costs -- since it needs a good deal of work. Here, we have Mark Thoma doing most of the hefting, so let's be grateful.

Methinks ...

[paine]

curt
read the jounal articles
don't make up straw dogs
in the quiet of your own head
read these cited authorities
not wikipedia

use your logic chopper
but read to comprehend not refute

you give off the aroma
of a self taught uber nerd
more power to you
for insistent re assertion
despite ridicule
you must appear
to triumph in your own mind
and if that sooths you
i'm pleased

what is off putting
to some might be
not your pugnacity
but your cluster fucked thoughts
example

"The population outstripped the knowledge distribution and the tools for calculation. Celts corrected this by disallowing power accumulation. Babylonians exacerbated it. This problem is why they invented monotheistic religion: becuase they had no other system of coordination"

that is near babble
hardly a basis
for the self satisfied
steady state equilibrium
of austro- libertarian "preferences "

i'll not get thru the mirror stage thicket
you are hung at

if i tried to respond to your tar baby tactics
i'd be the fool
you take me and too many others for
i did notice a flicker or two of comprehension

what have you read
web site hayek ???

[calmo]

So paine, my pal, which izit a web of "cluster fucked thoughts/near babble" or
possible ignition of that flicker of "comprehension"?
I would say if there was anyone who could light it, twould B you.
Welcome back Curt...so 2 classical philosophers/post --which is speeding around here. [You realize this is a call for eva to join us?]
Can't quite continue without exorcising this chunk:Lafayette says...

C(urt)D(uzzitall): I am trying to see if someone sufficiently knowledgeable will enter this debate.

Try being a bit less literary (wazzit a pun on litter?)[Izzinit always?]... ? If you want answers, you have to ask questions -- not lecture. Blow me away, you devil...so you figure Curt Do is entertainment for this discussion (tis Curt, no debate...your cue: no self-appointed mediators...sadly) or just a philosopher sprinkler run amok?
Last ting: Curt, pretend everything is normal and there is no Nobel waiting for you at the end of the day.

[reason]

If understand Curt correctly he is von Mises fan and wants to throw neo-classical economics completely out the window (no Friedmanite be he). Well and good, but I'm all for both science and democracy as evolutionary processes, in the same way as the market is. Each have their place and one alone won't work (because each of them is based on a completely different primary aim). Fanatical adherence of one single evolutionary information discovery process is inimical to human progress.

[reason]

Besides which, I happen to believe both externalities and increasing returns to scale are pervasive and so the market tends to a socially suboptimal oligopolistic command and control structure, not a free-wheeling libertarian utopia. Show me the evidence that I'm wrong.

[Lafayette]

paine: read the jounal articles
don't make up straw dogs
in the quiet of your own head
read these cited authorities

Right, and if we want to discuss religion, you are going to suggest I read the Bible?

C'mon on .... talk sense.

[Lafayette]

reason: I happen to believe both externalities and increasing returns to scale are pervasive and so the market tends to a socially suboptimal oligopolistic command and control structure, not a free-wheeling libertarian utopia.

Oh, really?

Show me the evidence that I'm wrong.

First, show us how you're right. Give an example of the above that is concrete. Namely, and I'm interpreting what you wrote, that returns to scale of large production (of either goods or services) leads to an oligopolistic optimization of those returns (concentration of profits). And, therefore may evidence price fixing, which are what oligopolies are wont to do.

First of all, where is very-large scale production occurring? (What industry? What country?) And, where is it creating an oligopoly that somehow escapes the attention of regulatory authorities?

Then explain, how do managers make investment decisions (to develop products/services) that can be sold at the lowest possible cost, by incurring the economies of scale (that allow amortization of fixed costs over the largest production possible), yet do not provoke an oligopolistic situation. And market competition, and therefore the lowest real price, is "naturally" maintained.

Good luck! Cuz I don't see how that bit of magic (above) can be accomplished except in the minds of economists. The logic defies gravity. Meaning this:
* EITHER an economy allows companies to compete for the largest market share possible (by lowering operational costs, that is, amortizing them over a larger production cycle) and developing market concentration in an oligopoly
* OR regulators decide that an oligopolistic market must be avoided at all costs by having the largest number of market participants, with total demand served by the greatest number of participants possible -- and therefore production constrained by that sharing of the market. Which leads to a higher general level of product/service pricing in that market.

There is a third option, which most countries adopt. Allow oligopolistic markets to exist, wherever they form naturally, but assure that the remaining competition does reflect bona fide market pricing and not price fixing amongst the limited market participants. (And, price fixing, either direct or tacit, is a fairly common occurrence in our times. We see it often enough, in Europe, announced with fanfare by the Competition Ministry in Brussels).

NB: Oligopoly: A state of limited competition

[reason]

Lafayette,
are you agreeing or disagreeing with me? Examples abound (try software, pharmaceuticals, energie, music publishing) for a start.

[paine]

my pal comrade curt
"You ignore the disequilibrum effect of innovation, or the priority of innovation over equilibrium"

it is precisely these non "future "markets
that destroy the possiblity of any deeper use
for the arrovian paradigm
(perfected fully determining markets)
and its implied state min welfare theorems
this larger critique of that older paradigm --the one you still feel confident you're facing---
in the 70's and 80's
seems the full import of these brake thrus
has largely escaped....untrained ears and eyes like
your's
so far at least

though stiglitz remains in spirit and method
within the neo classical tradition
he hardly shares politics with say greg minkiw
or marty feldstein
your almost obessive symptomatic use of equilibrium
preference and a few other tick off /tick on words
is not just oddly disquieting
but off base here

no equilibrium claims are necessary
in greenwald stiglitz
model to reach its general conclusions
highly unstable realizations can exist
sorry you have not "bested "stig ...yet my friend
but we're all rootin for ya

if you want detail i can give detail
but stig does it compactly and completely
and that is the reason i point to the articles
like laff's bible
it does it better

besides like laff on a fast day
you seem smart enough
to realize your mis characterization
if you bother to read the texts

but yes you are beyond the neoclassical paradigm
yourself
off in austro macro-mysticism
a hamlet nestled in the cloud shrouded
urals of human thought

ahh
the inviolate vitality of the organic intricacy of it all
if we could but leave to the multi national corporations

fine
you and hayek von mises et al
are like a doctor who sez
i no longer practice ...i can only do harm

not all we doctors feel that to be science's
firm and final conclusion

i suggest the nobel committee isn't
perhaps austrian
but hardly leftist or modern liberal even
let alone socialist
at least as the label socialist is used
in any non rant use of the notion

as to appeals to authority
with you one one side
a god must be summoned on the other

[john c. halasz]

"Besides which, I happen to believe both externalities and increasing returns to scale are pervasive and so the market tends to a socially suboptimal oligopolistic command and control structure, not a free-wheeling libertarian utopia. Show me the evidence that I'm wrong."

Bingo!

Laf, almost all major industrial markets have developed into oligopolostic structures of from 3 to 7 dominant firms taking 90%+ of the market and a "tail" of hundreds of small firms occupying niche positions in the remainder. If such oligololies are now under competitive pressure, it's due to globilization having put pressure on national markets, but that, in part, just provokes a wave of further, still larger consolidations. (Though also, in part, globalization has resulted in a reorganization of corporate business models, resulting in new virtual oligopolies, which outsource their supply chains to smaller, competing firms in the developing world, while maintaining control over design, branding and marketing). If you want an example of actual price fixing, which is, of course, illegal, (though one might suspect laxly enforced), there was a case about a decade ago involving grain processors, (of which there are 7 in the U.S., mostly still privately owned), conspiring to fix the price of some sort of starch extract. But price-fixing is not really necessary, as economies of scale/barriers to entry prevent most new competition, and, further, various pricing moves can be made, which function as signaling without being illegal collusion, which is stuff for game theory to analyze. And distinguishing between oligopolistic quasi-rents and the producer's surplus stemming from increasing returns to scale and cascading technical productivity improvements is a dicey proposition, since that must be expressed in terms of some numaire, which expresses the fact that such industrial oligopolies are exchanging with other less concentrated sectors of the economy. At any rate, any account that focuses exclusively on market competition as the unique source of "efficiency" and real wealth not only ignores the different structures of different, but interlinked markets, but the fact that the production system is not simply reducible to the terms of market transactions, but has reproductive constraints and dynamics of its own, and the fact that the primary source of increases in real wealth is technical improvements in the productions system, raising productivity and developing new processes and products, which markets might stimulate and promulgate, but do not create.

[calmo]

Thanks for rejoining us john and providing me, maybe mo, with such beauts of continuous thought streams...you don't know how discontinuous and erasabled some of us think.
As usual I have the insatiable urge to throw confetti dots at you...just to slow you down.

[STS]

Curt:

(If you're still around ... this thread has grown quite long in the tooth ...)

Do you advocate a gold standard? And where do you see the error in my arguments concerning gold? (ie. gold quantity is irregular, fixed money supply is inherently *contractive* relative to human population and economic activity). To those objections let me add that when the gold standard functioned best (maybe late 19th century) it relied on quasi-political coordination among major banking centers. How do those rules get updated?

Are you advocating private coinage? How do you distinguish that from the sort of private money already created in large quantities in the form of credit -- both by private banking corporations and by the new variety of "shadow banks?" What really distinguishes money coined by XYZ corp, from commercial paper issued by XYZ corp?

I share your distrust of monopoly power, and important constraints (the stuff of constitutions) need to be placed on monopolies (checks and balances). But money strikes me as among the more natural and inevitable candidates for (regulated) monopoly treatment. Natural because it is more useful in a universal form (efficiency argument) and inevitable in that "To coin money, regulate the value thereof" (US Constitution, Article I, section 8) is power (political argument). Failure to regulate this power endangers any political order.

I think Minsky was correct in arguing that the banking system is inherently unstable. I can't trace that to some specific policy errors -- to me it seems a part of the human condition.

We all could do worse than to go read Minsky, for example here:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=171533&download=yes

[Lafayette]

reason: are you agreeing or disagreeing with me?

Agreeing or not within an exchange is not the point of debate. Furthering the debate is the objective.

What do you think? Ami agreeing or not? Rebut.

We agree enough on most things, reason. And, sometimes we don't. It is the latter that is far more interesting.

I don't know what your intentions are in this forum. To find agreement? To win debates? Both these objectives are beyond me.

I argue forcefully, it is my nature, but I am not looking to "win" anything. Believe me.

My point: The exchange was about oligopolies. I introduced the riddle about such markets. What do you think about those two opposing tendencies that regulatory authorities must contend with in economies that evolve, daily, towards higher levels of Market Consolidation. This latter is a common facet of many, not all, markets today. The debate is relevant. Very relevant.

Concrete example: Yahoo! reports sick fourth quarter earnings today and announced redundancies. Is the Search Engine industry turning into an Oligopoly? Perhaps even a monopoly? Will Google be "Doing Evil" soon with its monopolistic advertising prices? (Wicked thought, eh? ;^)

[Lafayette]

STS: What really distinguishes money coined by XYZ corp, from commercial paper issued by XYZ corp?

Nothing, both are denominated in dollars (or euros). What is your point?

Coinage is the money of common use in commercial transactions. Commercial paper is a financial instrument, not a piece money -- even though it has many of the attributes of the latter. Such as, it can be exchanged. Such that it has financial value. Such that money changes in value depending upon inflation, whilst CP can change value (its price) in transaction.

The significant difference between the two is in usage. Coinage is employed in commercial exchanges (of money-for-product/service). CP is more a financial instrument that allows companies to avoid Bank Credit when seeking further short-term capital.

To my mind, therefore, there IS a difference between the two.

[STS]

Lafayette:

I was trying to ask Curt to explain what he is in favor of.

It sounded like he thought there was a problem with the state monopoly of coinage, but it seems to me that whatever useful goal he might have in defeating that monopoly is already achieved through routine parts of the modern banking system. Letting companies (or other private) actors go even further than what they do now wouldn't add anything useful and would cause confusion.

I find it entertaining that you started your post by denouncing my silly question, and reversed your own position within 3 paragraphs ;) Money/credit is a treacherous subject! (Don't tell any French philosophers ... they'd have a field day with this stuff!)

[Lafayette]

A mind-boggling challenge

STS: I was trying to ask Curt to explain what he is in favor of.

Look, STS, this is a blog. There is no way in hell that any third person can keep track of an exchange that YOU are having with another poster. Did you actually think I was going to back up on a blog to find and read Curt's post to which you refer?

No way, José. Blogs are not for distinctively threaded debates. It is more like "stream of consciousness", where posts follow one another helter-skelter and meandering is prevalent.

I pick up a phrase, perhaps even out of context, and I comment upon it. It is not meant to put you down, but simply further the debate.

If you know of a better way to exchange in a blog -- where it is a mind-boggling challenge to separate the wheat from the chaff -- I beg of you, do tell me. I'm all eyes.

[STS]

Lafayette: chill.

[Lafayette]

STS: Lafayette: chill.

Very impressive articulation of a complex and profound idea.

Must have been a real challenge to your intelligence. Thanks, anyway, for the effort.

[Guinnevere]

Well... This started as an interesting discussion, and has ended as a boring, incomprehensible "wank" by people trying to impress one another with their Superiority of Understanding.

The old saying was never more true: "If You Can't Dazzle Them With Brilliance, Baffle Them With Bullshit."

It's getting incredibly deep around here.