Dat inequality

[wufwugy]

Pulled this from the comments section of one of Scott Sumner's blog posts. I always say how everything the media says about economics is horseshit, so I'll back it up some now. Here's a much better presentation of the data on income differences between classes. There are many more factors that should be included to get a more accurate view, but the article focuses on just three factors that the popular media avoids, which end up making the picture far different. Basically, income for the non-rich has been going up a lot over the last several decades.

http://www.minneapolisfed.org/public...y.cfm?id=4049&

[wufwugy]

Moving the discussion away from the rando thread

Not everything needs to have a price. This is fault of capitalism. Why can't we just not hunt or kill rhinos? If you're suggesting that allowing breeding and/or hunting is the most efficient way in terms of resources required to save the rhino then you are probably correct. But it's not always about efficiency.

But this isn't working. Tax or donation funded institutions have not solved the problem and the rhino will absolutely go extinct if this doesn't change. The same scenario has happened before, and the conclusion is basically that conservation is a product of creating a legal market out of the product. I wish I could agree with you that we should just be morally better, but we've been trying that and it demonstrably does not work.

I mean you could probably make a market for killing humans for sport, or cats and dogs or w/e, but we as a society get to have a say on what is or isn't acceptable. That's the point of a democracy. This is a prime example of allowing money to decide things and money has no sense of right or wrong. ethics and morality don't come in to play. If money is deciding things, then those with the most money have the most sway and that is huge part of the problem.

I think this is a false view of the role money plays. (1) Money effectively represents morals better than the democratic vote. Votes are far more indirect and abstract. (2) "Those with the most money" don't have nearly as much influence as people think, and because you have money you have influence unlike you would without money.

This fits in the analogy Caplan uses about how a surgeon who thinks he's better drunk has to change his belief because of consequences yet people who believe in inconsequential abstractions (like God exists) can go their entire lives believing the wrong thing. Democratic votes are indirect abstractions compared to the far more direct and consequential product created by money. "Voting with you dollar" is way better. You get to do it everyday in ways that obviously matter, but with democratic voting, you rarely do it and it's always a mishmash of muddy abstractions.

As for a market in killing humans for sport, I think you'd be surprised at how much the money hates that idea. Look at our current world. The closest thing we have to "killing humans for sport" that is run by a market is the NFL. Then we have wars, which are "killing humans for morals" and run by non-capitalist authoritarian institutions. I don't think making a sport of killing humans is a concern, and I believe the real concern is how needlessly humans are killed for anti-capitalist morals

Another approach to the rhino issue could be to employ a ton of people to protect them. This would give lots of people in that area of Africa a job, which would increase economic prosperity there and therefore reduce the need for Africans to slaughter rhinos to earn money. It would cost more but that doesn't mean it isn't a better option.

That's the current belief, and it has failed. It's colossally more expensive than what people are willing to pay. It would be easy and cheap as pumpkin pie to save the rhino by making a legal market out of the horns, but the species is going extinct. We absolutely need capitalism to solve this problem because the costs of doing it without capitalism are way too high. Employing enough rhino-policemen would just be super expensive and all of us would rather let the rhinos die. Pricing things through morals without letting supply and demand work is the reason why the Soviet Union failed

Again, this would undoubtedly force some people into having to sell a kidney. The combination of private healthcare and the opportunity to sell a kidney would mean a ton of poor people with a sick kid now have only one kidney. SO those born wealthy don't have to sell a kidney to save their sick kid where as those born poor do. This is not a good way to improve living standards. We have all these resources squirreled away at the top that could solve a ton of issues but rather than distributing them in a more equitable way you're suggestion is let the poor sell their kidneys.

Caplan covered this well in the lecture. If a poor person sells his kidney to feed himself, he is better off. He chose to do it. If it is illegal for him to do, he starves. One of these outcomes is better than the other

About "money squirreled away at the top", it isn't true. There is only a tiny amount of idle cash in the world. What percentage of Microsoft's capital do you think is "idle" or should be redistributed? My guess is <1%. Redistribution of any significant chunk of the company's capital changes everything else down the line. If the theory of "squirreled away money" was true, bankruptcy wouldn't be something that happens all the freaking time. Every business is already operating on the margins. Start redistributing capital and you start seeing Google doesn't have the capital reserves that allow them to work RnD on cars or glass or fiber, and we all suffer. It would be worse than that though, as reduced reserves and investment capital would have negative effects on employment. Some redistribution can have positive effects on demand, but only when they don't extract much from supply. Regardless, supply-side reforms are the main way we know how to increase demand.

1) Let's begin with the economics. A new study by economists Emmanuel Saez and Gabriel Zucman shows that the richest one percent of US households have almost doubled their share of the nation's wealth since the 1960s. One percent of the country owns more than 40 percent of the wealth — and that share is rising.
2) In contrast, the bottom 90 percent of the country owns less than 30 percent of the nation's wealth.
3) If you look closely, the rise of the one percent is actually the rise of the 0.1 percent. In the 1960s, this group owned about 10 percent of the nation's wealth. By 2012, they owned more than 20 percent.

This data is meaningless since it doesn't account for subsidies correctly and treats capital income the same as wage income. These studies have been rife with such egregious flaws that they're telling us the wrong story by a lot.

In addition, like I said, inequality tells us nothing. Think of the cancer cure analogy. Things that increase wealth also increase inequality. The left-wing is making a big mistake by caring about inequality. We should care about poverty. That's the real problem

4) It's well known that as the rich have gotten richer, the top income tax rate has gone down. In 1960, the top marginal tax rate was 91 percent. It's now 39.6 percent.
5) Similarly, as the wealthy have gotten wealthier, the estate tax — which taxes inheritances — has been declawed. In 1960, the tax began at estates of $60,000, and the top rate, which hit estates above $10,000,000, was 77 percent. Today the estate tax doesn't even begin until the estate is worth $5,340,000 — and after that, the top tax rate is just 40 percent.

These numbers tell us nothing about economic incidence of tax, only legal incidence. The data is basically cherry-picked to make an agenda.

Capitalism isn't needed to ensure the best people make decisions. That's the point of democracy in itself. Not that politicians get voted in because they follow popular opinion but because the populace believe they will make the best decisions on our behalf. And certainly not because they got huge financial backing from some wealthy folk and now have to return the favour with policy.

What you propose is what we have been doing for a long time, and it isn't working. Let's try capitalism instead. Let's make it so placing values on everything allows us to vote many times everyday for at the right price and apply our morals effectively. This other democratic republic method only lets you vote once a year and mushes everything together at once. Democracy works better than dictatorships because the accountability institutions have towards the people is greater, and capitalism works way better than democracy for the same reasons.

I can see no reason why capitalism would choose to solve this, a great education for everyone is not in the best interests of teh financial elite.

Financial elites don't have much say over this. Capitalism fixes education by letting capital flow where it is most valued. I hope we can disavow ourselves from the notion that the rich have so much control over things under capitalism. The irony is the only solution we have for eliminating the influence of the rich is capitalism

The short of how capitalism fixes education is by reducing costs and raising costs based on the law of supply and demand, and people distributing capital in consequential ways. Most of our current education system doesn't have much consequence, and that's why we have super crazy things like students going into major debt to get degrees that don't do much.

Capitalism has turned hunks of metal into cars. It fixing education wouldn't be that difficult.

As I said above, I think capitalism makes sense as part of the evolution of society but it reaches a point where it no longer benefits society, or maybe just isn't optimal.

I'll repeat what I said earlier because I think it's important. It isn't that we have tried capitalism and it worked in some ways but not others, but that every area we have tried it, capitalism has worked wonderfully, and people are mistakenly blaming problems caused by statism on capitalism. What we need is a move towards capitalism, not away. Capitalism is the next evolution of society.

But as the same time it is inevitable in a capitalistic society that wealth gets accumulated by very few people and those people then have a huge incentive to use that wealth to ensure they never lose it and that includes using that wealth and power to effect policy.

This is a fantastic pro-capitalism argument. The major influence of the wealthy is a product of legal institutions creating regulatory capture. Nothing crushes the rich like capitalism, because it thwarts regulatory capture and increases competition from all sides.

Do a causality chain of private prisons and you'll find that it isn't because of wealth that they exist, but because of mandatory taxation by legal institutions. Private entities only have opportunity to profit on capital distortions like imprisonment because they can lobby unaccountable policy institutions. Take away those institutions, and imprisonment loses its profitability, and there are magically no more private prisons.

Private prisons are not a story of the wealthy, but a story of regulatory capture created by unaccountable revenue streams (taxes) that provide supply for otherwise un-valued lobbying.

More about kidneys, how many are even needed. I'm pretty sure if we start at a decent price supply will outweigh demand by a huge amount and good old demand and supply would probably get it down to about $1,000 per kidney. You'd have to be desperate to be considering that.

Many people are just that desperate. I think it is morally abhorrent to not let people who value selling a kidney to do so. In our current system, there is no value in charity or welfare benefits for these people, so the only way their lot in life can improve is if we let them do something about it. Besides, charity and welfare benefits create all sorts of other problems due to disincentive to work. I hugely support a robust welfare system that incentivizes results. Also I read a study a while ago that suggests that one of the main reasons Africa hasn't pulled itself out of poverty is because of charities like Salvation Army. Basically, indigenous clothing businesses were pushed out of the market by Americans giving away clothes because they thought they were helping, and this stymied a burgeoning economic revolution.

BTW, $1000 in poor areas would revolutionize the world. A recent study showed that just a small distribution of capital to dirt-poor Africans increased their capital growth by many times over.

[wufwugy]

I'm not sure anybody remembers (boost might), but talking about capitalism always brings me back to 08-09 when we had huge ass arguments with ISF, his brother, and some dude called Lyric or something. They were basically saying the stuff I say now. I can't believe how wrong I was. Oh well, it's always a learning process. Do any of them still post here? I wonder if they even remember.

[Renton]

If rong or boost or somebody would like to suggest some strategy to combat inequality and poverty that doesn't result in resources being wasted on a colossal scale, I'm all ears. I grow weary of discussing this topic on a macro scale because it just becomes a matter of opinion and an ensuing shouting contest.

I think a more productive discussion can take place if you attack this issue from the fringes, isolating small but representative examples of the problems of unfettered capitalism or wealth distribution or whatever else. For example, instead of saying that socialism is an abomination and listing broad reasons why I believe that, I could state that rent-controlled apartments are very hurtful to low income people in inner cities, and give a series of concrete bullet point reasons why this is true. Then the left-inclined opponent can point out why I am wrong or suggest a collectivist alternative.

[wufwugy]

That's a good idea.

[Renton]

One thing I will say is that inequality is not a problem in and of itself. People are productive to varying degrees and it is absurd to strive for perfect equality. Tom Cruise pulls 20 million dollars a picture because he could act in a 90 minute long strip of celluloid where he just makes finger-painting with his own feces and the picture would make at least 20 million dollars in theaters. He's an EXTREMELY productive person in the economy. People who work fast food are getting paid a minimum wage that the left would like to increase to 16 dollars an hour, yet we see fast food restaurants going bankrupt or merging with one another all the time because their profit margins are razor thin at the current rate they pay their employees. Could it be that the dude who takes your order in the drive through is making probably more than his productivity level would suggest?

Inequality is a false issue, the true aspect of society that needs to improve is mobility. Our policies need to provide incentives for getting people to do one or more of the following things:

- find a career
- advance in said career
- start a successful business
- innovate

Those are pretty much the only four things that people can do to improve society. The economic system should encourage people toward doing these things. And as it happens, the profit-and-loss system does this better than anything we've yet to imagine. Policies that disrupt the profit-and-loss system should make up for that by increasing the incentive for people to do one of those four things. Most of them do not.

[rong]

How about giving everyone free healthy and nutritious food. Maybe open up a shitty looking cheap ass cafe in every town run by the government that will give anyone who walks through the door a really healthy dinner, no questions asked, every day of the year if need be. May as well throw in free school meals for everyone as well, but has to be really healthy.

[Renton]

How about giving everyone free healthy and nutritious food. Maybe open up a shitty looking cheap ass cafe in every town run by the government that will give anyone who walks through the door a really healthy dinner, no questions asked, every day of the year if need be. May as well throw in free school meals for everyone as well, but has to be really healthy.

Well it's a huge matter of opinion what constitutes a nutritious meal, or even what the meaning of the word "healthy" is. A cursory look at health/diet forums would make this fact pretty obvious. Some people think red meat is unhealthy, some people think all meat is unhealthy, in the 80s/90s everyone thought fat was unhealthy, in the 2000s it was carbs.

Capitalism has already gone a long way toward solving the problem of starvation in 5 of the 6 inhabited continents by making food incredibly cheap. A government restaurant that gives free meals to people would probably just become perpetually mega-crowded by people who could afford to eat but would rather not pay for food. One of the major things prices do is provide a signal for conservation and sharing of resources, including food. Without this signal, its impossible to accurately and conservatively distribute anything.

As a side point, when you displace someone's monetary obligation for food, they are likely to spend that money on things that they need less than food. A focused example of this problem is if you buy groceries for your crackhead family member out of the goodness of your heart, you're just enabling him to buy more crack since he's no longer obligated to spend that money on food.

There are just a lot of paradoxically negative effects of such a well intentioned program as that.




edit: I forgot to note that your program, if implemented on a large scale, would also potentially cause a dramatic increase in the prices of all food, and increase the chances of a widespread food shortage. It would do so by disrupting supply and demand, which depends on prices, and inflating demand since people use more than they need when the resource is without cost.

[a500lbgorilla]

Well it's a huge matter of opinion what constitutes a nutritious meal, or even what the meaning of the word "healthy" is.

Capitalism has already gone a long way toward solving the problem of starvation in 5 of the 6 inhabited continents by making food incredibly cheap.

I like how the most rational distribution of resources is a firm known while a healthy diet is a fuzzy concept to you, Renton. Both are fuzzy concepts, but you never allow yourself to admit the things you don't or can't know when you predict a free market future.

Plus, Capitalism becomes an umbrella for a whole lot of stuff when you say "has already gone a long way to solving starvation". And if you really dug into it, it would be only one factor and likely not the largest.

Bigger factors than capitalism? This guy. http://en.wikipedia.org/wiki/Haber_process

I guess the point of my post is that you should treat all of your statements about capitalism like you treat statements about healthy foods.

[Renton]

I like how the most rational distribution of resources is a firm known while a healthy diet is a fuzzy concept to you, Renton. Both are fuzzy concepts, but you never allow yourself to admit the things you don't or can't know when you predict a free market future.

Plus, Capitalism becomes an umbrella for a whole lot of stuff when you say "has already gone a long way to solving starvation". And if you really dug into it, it would be only one factor and likely not the largest.

Bigger factors than capitalism? This guy. http://en.wikipedia.org/wiki/Haber_process

I guess the point of my post is that you should treat all of your statements about capitalism like you treat statements about healthy foods.

You're not totally wrong, but I think you're operating on a false equivalency that basic economics is as unsolved a science as nutrition. Nutrition is far more hazy, there are dramatic swings in consensus on the most basic concepts all the time. Most of the boons of capitalism can be boiled down to very simple supply vs demand stuff. These are very well established concepts that most anti-capitalist arguments tend to ignore altogether. One thing I will concede is that while I believe that most, if not all, of the great things about modern society exist thanks to capitalism, I don't presume to state that pure free market capitalism has ever been demonstrated on a large scale. Thriving societies have merely been capitalistic, that is having mostly capitalist aspects with a smattering of collectivist ones.

The other thing I want to touch on is human ingenuity. Your point about the haber process being more important than capitalism is worth discussing. Innovation allows us to dramatically improve our standard of living, and innovation comes from human ingenuity. There are few ways of tapping the ingenuity of millions of people in a society that are as effective as having a free market that allows people to become rich from their ideas. Of course in a pure egalitarian society there would still be extraordinary people who make new contributions to science and technology, but there would be far less incentive for such people to emerge.

[wufwugy]

Since we're doing walltexts. I started wanting to do just three lines, but it turned into paragraphs about net neutrality and shit

I enjoy these discussions though

I like how the most rational distribution of resources is a firm known while a healthy diet is a fuzzy concept to you, Renton. Both are fuzzy concepts, but you never allow yourself to admit the things you don't or can't know when you predict a free market future.

The capitalist mechanism isn't fuzzy. It's all just arithmetic and algebra. There is a capital cost for everything, sustainability of production of anything is dependent on costs not outpacing prices, and costs are affected by supply and demand of production, which is affected by a myriad of other factors like innovation and cost curves.

Capitalist distribution of resources isn't perfect, but it is the most consequential and with the most numbers of possibilities, which means the most capacity to solve problems. In the lecture I linked, Bryan Caplan puts it perfectly when he says when you ask economists how to solve a problem, they look for ways to get rich by solving the problem. If they can think of ways to get rich, then they don't worry about it, because capitalism is the known mechanism to do that. But when they can't figure out how to get rich by solving a problem (perhaps like fixing the ozone hole), they worry because capitalism may not solve that and it may require state intervention.

Plus, Capitalism becomes an umbrella for a whole lot of stuff when you say "has already gone a long way to solving starvation". And if you really dug into it, it would be only one factor and likely not the largest.

Bigger factors than capitalism? This guy. http://en.wikipedia.org/wiki/Haber_process

Some inventions could be said to not be motivated by capitalism, but engineering them and bringing them to market sustainably is. Even so, the vast majority of inventions are a product of capital incentives. The internet is a good example. Many like to say that non-capital incentives invented the internet, but I think that is mostly wrong and misses the history of the internet. First off, the invention was gathered through wealth created by the capitalist process and it would be hard to say that it wouldn't have been invented by private developers shortly after the military did regardless (timing on the invention was a technology thing, not a "the govt was working on it" thing). After this initial invention, however, the internet didn't do much. For years it sat around being something few people used. Technology kept advancing, yet the internet still sucked. It was only through the spark of something within the free market framework that it turned into a juggernaut that everybody needed. I don't understand this all too well, but it had something to do with Kazaa, Napster, and increase in demand for broadband in order to fuel mp3's through those sites.

Today, we would say the internet is going crazy. Growth and innovation is off the charts. In fact, traditional GDP measures are falling way short because they don't account for this sort of innovation. Costs of all sorts things in just a decade have fallen by factors of ten or more just because of the internet. This is the best example of the free market we've had to date. Granted, government has been hindering it a lot (any poker enthusiast knows that intimately). But outside of poker, municipalities have been crushing internet growth and the masses are trying to get the FCC to go even farther. On this net neutrality debate, most people think it's better for the government to step in and mandate access and speeds for all, but that is precisely the opposite of what would benefit us the most.

Government intervention at the municipal level has already crushed broadband expansion because of special interest voting blocs that have to do with unions, zoning, and some other factors. We can blame government intervention for why Google Fiber isn't already available everywhere. Now everybody wants the FCC to make things even worse than municipalities have by declaring the internet as common carrier, which will basically eliminate any incentive for companies trying to enter the market. Net neutrality will make speeds faster today and tomorrow, but five years from now, speeds would be faster if government just let the market work. The best possible thing for us is Comcast and Time Warner to really go ahead with a fast lane. There's no quicker way to get Google and Apple to drop 200bn on creating their own networks, which will either make Comcast raise speeds or die. Without a competitive process, twenty years from now, the internet will be similar to what it is today. But with a competitive process, today will look like the stone age

I like this parallel because you're to unregulated free markets what a believer is to the keto diet. Has all the answers, believes it's the best diet because he sees it's effects all over the place, really thinks its in everyone's best interest to adopt it and I'm just sitting here thinking I don't expect to be eating meat and cheese for 3 square meals a day.

In the lecture, Caplan says that every Marxist economists he's talked to even agrees that capitalism should be used for kidney markets.

Capitalism isn't so much an ideology as it's a way of describing economics. Even the most left-wing economists are far more capitalist than the general public. The kinds of disagreements economists have tend to not be about markets, but about how to use government intervention that already exists. I think the media has incorrectly given us the impression that anti-capitalism is something some economists think has merit. Even Keynes, who is considered by the public to be super pro-government, wasn't. He was quite right-wing. As far as I can tell, his pro-government bent was really just about using government to spur aggregate demand if there is a time when the private market doesn't. Outside of that, he was very pro-market

[wufwugy]

And they're off!!

[wufwugy]

I'll add that doing that would make the real cost of nutritious food skyrocket without providing any mechanism to meet the demand through production increases. This is mainly a product of the "no questions asked" clause. "No questions asked" is likely universally bad. Unconditional policy incentivizes abuse. Again, this is why the Soviet Union didn't work. It attempted to impose condition-less-ness on a conditional world. Supply and demand is as real a mechanism of society as gravity is of physics.

This doesn't mean there are winners and there are losers. It means that winning is for the taking. In the West, if we want food, we trade our efforts for food (money = representation of production = representation of efforts). If we didn't do this, we would find that if we wanted food, there wouldn't be any because the same applies to those who produce food. Like us, they too would wish for results without effort. Winning = labor + resources. In a non-coercion society (basically where you don't have fear of being murdered or mugged or restrained unless you did some murdering or mugging), everybody has the ability to do this

Furthermore, even if trying to establish universal unconditionals does work, it is at the expense of the future. Capitalism doesn't necessarily make things better right now, but it does tomorrow. This is because of how competition drives innovation.


Instead of saying "let's feed everybody" as our foundation, I think we should ask "how do we sustainably feed everybody?" I think we'd find the answer to that doesn't involve mandated institutions, yet does involve a capitalist approach.


Another thing to keep in mind is that capitalism requires non-coercion. It is true that in a lot of societies, a stateless one would give rise to an authoritarian state. I think this means the starting point is to create a state with a constitution that mandates non-coercion. This would basically make a government that is constitutionally required to stop people from doing things like murder, but can't stop people from doing things like selling drugs. In a way, I'd say our real problem is that our constitution doesn't address coercion correctly. If we could figure out a way to make it illegal for the state to coerce anybody who is not causing harm to others, we'd be on the cusp of a global revolution.

Honestly, I think if we could unshackle ourselves from the evangelical right and nanny left, the US could actually get something like this put into the constitution. It won't happen though. But that doesn't matter since technology advances far more rapidly than laws, and we will eventually achieve post-scarcity. It won't be as quick as it otherwise would be, but it'll still happen

[rong]

I don't really see many reasons for it not too happen there but I do see some contradictions in your argument. I need my laptop to respond thoroughly though, only have phone right now.

But let me put this another way.

We all agree it's not right to discriminate on the grounds of race, sex or sexual orientation (i assume), yet we find it acceptable to discriminate on the grounds of wealth. A kid from the poor side of town is far more likely to have less face time with parents, eat less healthily, go to a worse school, get a lower quality education, get less years of education, have lower quality healthcare, have a lower paid job and continue this cycle.

How is this fair? It's just pot luck who your parents are, not that different from race discrimination, especially when you consider the correlation between socio-economic status and ethnicity. But forget that really because race shouldn't be part of this argument.

This is what I was thinking about resolving with the free food thing. It would mean no need for poor families to work as long hours which would mean more time for to spend with kids, kids guaranteed healthy food, parents able to spend the money the earn on better quality housing and children having a more equal start.

Now sure, food prices go up, but anyone who is too bothered by that doesn't pay it because they eat for free.

This doesn't address some of the larger issues I think capitalism creates, which is waste on an extraordinary level. You claim that capitalism is efficient and any allocation method not based on a demand and supply pricing mechanism creates massive waste , yet how does toys r us exist if capitalism is about the efficient allocation of resources? People struggle to make ends meet yet there are like 5000 different types of child's doll to choose from. Capitalism created that, which is ridiculous and kinda sick really, but money realised targeting kids with marketing was effective. That is not efficiently allocating capital, it's manipulating a natural market to avoid an efficient allocation of resources and instead maximise the amount the individual has. It's about a transfer of wealth, not efficient resource allocation.

[Renton]

We all agree it's not right to discriminate on the grounds of race, sex or sexual orientation (i assume), yet we find it acceptable to discriminate on the grounds of wealth. A kid from the poor side of town is far more likely to have less face time with parents, eat less healthily, go to a worse school, get a lower quality education, get less years of education, have lower quality healthcare, have a lower paid job and continue this cycle.

How is this fair? It's just pot luck who your parents are, not that different from race discrimination, especially when you consider the correlation between socio-economic status and ethnicity. But forget that really because race shouldn't be part of this argument.

It's certainly a problem, but most policy measures against this that have been implemented in industrialized countries tend to WORSEN the problem, not improve it. This is an issue that needs to be attacked with a level of finesse that states seem incapable of demonstrating.

As I stated above, the goal is to improve mobility, not equality. And social mobility is strongly correlated with the wealth of an economy. In the United States there is strong evidence to suggest that the great majority of people move through several different income brackets over the course of their lives, and this is what mobility is: the ability to move upward (or downward) in income.

Rich economies foster a demand for high productivity workers, which results in higher incomes. Higher income result in a stimulated supply of those workers, and when this supply is short, businesses become desperate to hire ANYBODY with a pulse and to train them to do the work. So creating an environment that encourages economic growth goes a long way towards achieving this goal, even in a completely anarchic society with no free education or housing or anything. Rich countries = richer (by comparison) lower and middle class people.

This is what I was thinking about resolving with the free food thing. It would mean no need for poor families to work as long hours which would mean more time for to spend with kids, kids guaranteed healthy food, parents able to spend the money the earn on better quality housing and children having a more equal start.


Now sure, food prices go up, but anyone who is too bothered by that doesn't pay it because they eat for free.

When you take a commonly traded resource and make it free, it causes a great deal of problems for the entire economy. There are just a ton of benefits of the profit and loss system that are crucial to the system, benefits that do not exist when a product is deemed free. Food with a price tag is always produced in accordance with the demand for that food. The price-coordinated demand is always accurate or a great deal of suppliers stand to lose a great deal of money.

Suppliers have huge incentives to innovate the product, either by making it more appealing to consumers or by making it cheaper to produce. These innovations ripple throughout the economy and affect things that may be vaguely related or unrelated at all to food. It is inevitable for a public food distribution enterprise to fall behind in innovation, and a couple of decades down the road be completely inferior to store-bought food, in price and in quality. And huge amounts of resources are wasted in the interim.

This doesn't address some of the larger issues I think capitalism creates, which is waste on an extraordinary level. You claim that capitalism is efficient and any allocation method not based on a demand and supply pricing mechanism creates massive waste , yet how does toys r us exist if capitalism is about the efficient allocation of resources? People struggle to make ends meet yet there are like 5000 different types of child's doll to choose from. Capitalism created that, which is ridiculous and kinda sick really, but money realised targeting kids with marketing was effective. That is not efficiently allocating capital, it's manipulating a natural market to avoid an efficient allocation of resources and instead maximise the amount the individual has. It's about a transfer of wealth, not efficient resource allocation.

I really hate that I already have a text wall because this is the paragraph I really wanted to tackle and I'm afraid you'll nod off by the time you get to this, but here goes:

Your toys r us rant falls under a broad category of anti-capitalism that I guess I'll call anti-consumerism. The problem with the anti-consumer argument is that I've rarely seen it argued in an objective manner, and thus I find it difficult to respond to. Yes, to you, that there are 5000 different varieties of toy in a world where some people want for food and shelter is ridiculous. But you need to understand that need and desire are very subjective things that evolve for individuals. I'm sure there are products you consider to be needs that I would find to be ridiculous. I "require" high speed internet or I would go insane, but a rickshaw driver in Nepal would likely find my need to be ridiculous.

That humans in a growing economy take on additional needs as their wealth increases to accommodate the costs of those needs is a beautiful thing, and not to be disdained. This is what we call "standard of living," and for the vast majority of people in growing economies on Earth, it has skyrocketed over the last 200 years. I hope in 2114 that everyone in the world can afford a personal robot assistant that they just can't live without, along with a retinue of robot sex servants and robot gourmet cooks.


Middle class families spend thousands of dollars on their children at toys r us every Christmas because it makes them happy, because they want those toys for their children more than they wanted the money in their wallet. They also were able to do this thanks to a world where they were able to make enough at their jobs that they had a comfortable cushion of income after buying food and shelter that they could blow it on items for pure pleasure. How is this not amazing for everyone involved? It creates jobs, stimulating free trade that is rapidly pulling countries like China and Indonesia out of abject poverty, and makes people happier than they would be otherwise.

And it is efficiently allocating resources. A plastic manufacturer had the choice of selling his plastic to a meat packing company or a toy manufacturer and the toy manufacture had the higher bid. The price of plastic went up a tenth of a penny, and plastic was thus distributed to its greatest need for the most accurate price. A teenager put in applications to work at a grocery store and toys r us, but toys r us chose to hire him more readily and at a slightly higher salary because they had a profit bump last quarter and found themselves shorthanded dealing with the increase volume. The going wage of a department store clerk went up a few pennies to accommodate the increased demand vs supply.

[wufwugy]

I'll try to not hit on anything Renton responded to

We all agree it's not right to discriminate on the grounds of race, sex or sexual orientation (i assume), yet we find it acceptable to discriminate on the grounds of wealth.

FWIW I think discrimination by actors in competitive markets is awesome because it benefits non-discriminators. It also better allows those who are discriminated against to vote with their capital. Anti-discrimination laws are just a window dressing and don't punish discriminators. I think a week or so ago I mentioned Gary Becker, a Nobel laureate who recently died who was most popular for explaining this and similar phenomena

Being discriminated against makes people feel bad and we all immediately go to the government to try to fix the problem. But as we've seen, it doesn't fix the problem, and it hinders the market from truly fixing it. Imagine what would happen if McDonald's didn't hire black people. Fucking bankruptcy ahoy! Not only would they be crushed by consumers who disagree with the policy, but productivity would lag far behind Burger King's and Jack in the Box's because those businesses would now have ample opportunity to hire better workers from the pool of black people while McDonald's is forced to hire the remaining slag from a pool of exclusively white people

I propose that we still have a bunch of racism today precisely because we've gotten the state involved and haven't let racists let their racism destroy them in the marketplace

A kid from the poor side of town is far more likely to have less face time with parents, eat less healthily, go to a worse school, get a lower quality education, get less years of education, have lower quality healthcare, have a lower paid job and continue this cycle.

How is this fair? It's just pot luck who your parents are, not that different from race discrimination, especially when you consider the correlation between socio-economic status and ethnicity. But forget that really because race shouldn't be part of this argument.

It isn't fair, but it also can't be fair. Without post-scarcity technology, this is a reality we have to deal with. Capitalism deals with it quite well since it raises opportunity for people in these situations. Before capitalism, if you were born poor, you stayed poor. After capitalism, all sorts of opportunities began springing up in such a way that poor people now can climb the ladder.

Some respond by saying that if wealth was just redistributed, it would pay for the good of the poor already. But the accounting says otherwise. If we redistribute wealth significantly, it's not nearly enough to do much. The only possible way to reduce poverty is by growing the economy. Redistribution will just make the median poor, put everybody at that median, and the business environment would collapse due to supply-side problems. Again, my go-to is the USSR. This is basically what that empire did.

This is what I was thinking about resolving with the free food thing. It would mean no need for poor families to work as long hours which would mean more time for to spend with kids, kids guaranteed healthy food, parents able to spend the money the earn on better quality housing and children having a more equal start.

I'm having trouble digging into this causally. I think somebody trained in economics could explain why this would create some pretty destructive distortions, but they would also be able to point out that fixing the problem right now isn't necessarily strictly a supply issue, but a political one. So I'll make a different point

This problem, along with many others, are solved by open borders. Open borders policy is hyper-free-market and eliminates a swath of government regulations. It's also uber liberal, yet I suspect most liberals would hate it. Regardless, geographic mobility fixes this problem by allowing people to move where their capital is best allocated. Most of the "working long hours and can hardly pay bills" is because they're living in the wrong place. Cities are fucking expensive, and municipal planning regulations have basically created the problem of poverty within cities by entrenching occupants who get priced out of the market for any variety of reasons.

Open borders would let people move to where jobs and shelter that their capital skills can afford are. This would create all sorts of immigration as well as emigration. For example, we would see vast capital flow into beachfront properties in Mexico as the new retirement communities and vacation homes and even just regular homes for the increasing internet-connected business world. This would make Mexico a much better place to do business, and immigration into US would plateau and eventually fall because the influx of capital would make for all sorts of indigenous opportunity

A ginormous problem of government is the hindrance of effective resource allocation. The question is often asked: "why is efficiency so important?" The answer is because it gets things where they need to go. We do have the technology to feed the entire planet cheaply, but people are still starving, mainly because of government-enforced regulatory capture by voters behind the walls of closed borders

This doesn't address some of the larger issues I think capitalism creates, which is waste on an extraordinary level. You claim that capitalism is efficient and any allocation method not based on a demand and supply pricing mechanism creates massive waste , yet how does toys r us exist if capitalism is about the efficient allocation of resources? People struggle to make ends meet yet there are like 5000 different types of child's doll to choose from. Capitalism created that, which is ridiculous and kinda sick really, but money realised targeting kids with marketing was effective. That is not efficiently allocating capital, it's manipulating a natural market to avoid an efficient allocation of resources and instead maximise the amount the individual has. It's about a transfer of wealth, not efficient resource allocation.

This is a demonstration of how incredible the wealth creation power of capitalism is, and also a demonstration of the kinds of problems created by lack of efficiency due to regulations like closed borders. Toys R Us is largely a suburb phenomenon. The suburbs are a bunch off people whose living standards are skyrocketing and are cut off to the rest of the world. We're so naive that we don't even know about the suffering of the world, and this naivete is maintained largely due to government policy like closed borders and construction regulations that keep suffering away from us.

Seriously, I think the Toys R Us point shows the opposite of what you do. Capitalism is powerful as fuck. So powerful that it creates a working middle class that lives better than kings a hundred years ago. When poor immigrants are allowed in, they don't do "the Toys R Us" thing. They remember the suffering back home or in their current lives, and they allocate their newly earned capital towards that. Without capitalism, the opportunity to improve position in life wouldn't really even be a thing.

[rong]

It's a wall of text topic. Pity me on my phone.

[a500lbgorilla]

I like this parallel because you're to unregulated free markets what a believer is to the keto diet. Has all the answers, believes it's the best diet because he sees it's effects all over the place, really thinks its in everyone's best interest to adopt it and I'm just sitting here thinking I don't expect to be eating meat and cheese for 3 square meals a day.

[Renton]

We're dancing very close to the over-broad territory that I wanted to avoid so I want to focus in on the topic of consumption. I think the concept that consumption is somehow bad is downright offensive, and its one of the most purely fallacious ideas that has been bandied about over the last couple of decades. I guess it became such a sexy idea for young people when Fight Club became so popular. I confess that I was even seduced by the anti-consumerism frenzy when I was younger.

I can totally have a respectful debate about the virtues of capitalism if your reasons for disagreeing with it are related to poverty or healthcare. These are real problems that capitalism only has indirect and uncertain solutions for. But this idea that modern people have too many luxuries, buy too many things, and just generally live too comfortable lives, I dunno. When someone starts talking like that I wonder if I am on the same planet as them. I just wish I could drag anti-consumer people into a time machine to 500 or 150 or or even 50 years ago, so they could truly understand what a life of strife and struggle and want is like. People on welfare today have a higher standard of living than the kings of a few centuries ago, and I hope people a few centuries from now have every luxury that is unimaginable in the present day. This is kind of the primary goal of human beings.

[rong]

I think the concept that consumption is somehow bad is downright offensive

I think excessive consumption whilst your neighbor starves is offensive.

[rong]

I don't agree that more luxury should be a primary goal of human beings. How about living in sustainable harmony with the planet and each other. It seems capitalism is at odds with that which I think is kind of sad.

[Renton]

I don't agree that more luxury should be a primary goal of human beings. How about living in sustainable harmony with the planet and each other. It seems capitalism is at odds with that which I think is kind of sad.

http://en.wikipedia.org/wiki/Maslow&#39;...archy_of_needs

Pre-industrial societies and nascent developing economies are comprised of people who struggle to achieve the bottom levels of need. As the wealth of an economy grows, its people are able to spend their time and resources fulfilling needs higher up the pyramid. We can see examples of this in modern society as people with middle class incomes are able to afford psychiatry, while people in struggling countries of Africa struggle to stay fed and sheltered.

So, no, being able to afford cinnamon flavored edible panties isn't necessarily the goal of human beings, but that would be a crass example of ascending the pyramid. In poor societies marriages are often arranged solely for financial gain and out of mutual financial necessity. By contrast, wealthier people are more readily able to marry for love.

Also, isn't industrialisation more of a reason for the increase in living standards than capitalism, although I agree the two have developed hand in hand.

Industrialization happened during a period of time that that is referred to as the "gilded age" or the age of robber-barons. This is also generally agreed upon to be the closest thing to unfettered capitalism that has ever existed. These so called robber-barons did more to enrich the lives of the people of their day than a hundred Steve Jobses. Yet this is an age of history that is looked upon with great disdain by collectivist-leaning scholars and economists.

[rong]

Also, isn't industrialisation more of a reason for the increase in living standards than capitalism, although I agree the two have developed hand in hand.

[wufwugy]

Renton, do you have any literature about that aspect of the Gilded Age?

[Renton]

Most accounts of that period will have either a heavy libertarian or socialist slant, unfortunately. It's a topic that Jeffrey Tucker and Thomas Woods tend to cover a lot. Here's a video that popped up on google, but I haven't seen it yet. I can vouch for the speaker though:

[rong]

Most accounts of that period will have either a heavy libertarian or socialist slant, unfortunately. It's a topic that Jeffrey Tucker and Thomas Woods tend to cover a lot. Here's a video that popped up on google, but I haven't seen it yet. I can vouch for the speaker though:

That was fantastic!

I think I may even be convinced. I tend to lay blame at the feet of capitalism that perhaps doesn't belong there. I think I'm leaning far more to the Wufwugy school of governance which is free market capitalism with a strong welfare state, welfare-capitalism I think it's branded.

[wufwugy]

That was fantastic!

I think I may even be convinced. I tend to lay blame at the feet of capitalism that perhaps doesn't belong there. I think I'm leaning far more to the Wufwugy school of governance which is free market capitalism with a strong welfare state, welfare-capitalism I think it's branded.

To be a little more specific, welfarism has a role when market reforms are lacking. I think if we let capitalism run in every industry, there would be little to no use for welfare. But we're not going to get that in our lifetimes, so welfare is here to stay. With that in mind, it needs to be structured in a way that creates incentive for results and it needs to have very little in the way of bureaucracies. The type of thing I'm talking about is a scaling wage subsidy and abolishing many, many other programs and agencies. Add in some vouchers for healthcare and education and abolish some more bureaucracies. Lower taxes a whole bunch.

We don't need a welfare program if capitalism is allowed to work, but we do need one because the populace's response to disaster is more statism.

[wufwugy]

Great speech. I particularly like how he describes that because resources are scarce, distribution of them can be either a political decision or an economic one (or more like that's the spectrum). Political allocation of resources is just not that good compared to economic allocation. We all want to live in a world where we can save the rhino through political allocation of resources, but we don't live in that world and the rhino is going extinct because of it. Economic allocation of resources is the solution. I try to extend this into the moral language that we tend to suppose with politics but not economics. What I mean is that people tend to think morals are enacted only through political processes (like voting for politicians), but I think morals are enacted through the economic process (like buying or not buying products from companies based on their practices)

[wufwugy]

Two videos very relevant to this discussion. Lots of capitalism vs government discussion, and an interesting blast from the past. Milton Friedman was such a boss. He earned his spot as the #1 economist of the 20th Century

[wufwugy]

[eugmac]

Why is it that the statistics show countries with more socialist policies like Norway or Canada has higher social mobility than the US?

[wufwugy]

Why is it that the statistics show countries with more socialist policies like Norway or Canada has higher social mobility than the US?

I tried finding it again a while ago but had no luck. It was a post where Scott Sumner compiled data showing that the US has done better over the last 30 years than all of these countries. We all know the stories about how since the 80s, income to the non-rich has fallen, and that is misleading since it has fallen more in regions that haven't done supply-side reforms in order to keep up with the natural fall due to reasons like competition from the East.

That aside, Norway and Canada don't have more socialist policies than the US, just more well-run ones. For the most part, US has the same level of monopoly of industries like healthcare as all these other nations, it's just that the policies therein are even worse. There's an example in education: IIRC a few of the Scandinavian countries use vouchers for schooling. Vouchers are a sort of mix between welfare and capital distribution since it keeps costs lower by not incentivizing overconsumption and it keeps quality higher due to increasing competition. Compared to the US, vouchers are "less socialist". The US used to have high competition between schools (like 50 years ago), but since then, districts have consolidated on a massive scale, policy has become centralized, and in return costs have gone up without showing results. By some measures, the US government can be considered a failure on the monopoly of education

There are several other "socialist" countries, Denmark and Sweden to be more specific, that could be said to be far less socialist than the US. From what I've seen, those countries have much lower government intrusion into the economy and peoples' lives. Those two, along with Singapore and Germany, are considered the best models by the capitalist libertarian economists I read. I don't know too much about Singapore, but Germany gets good grades because in the mid-nineties it was an unemployment disaster, yet it instituted several labor reforms and after just a decade it now has the strongest labor market in the world.


Also, I don't believe that Europe by and large has higher social mobility than the US. Scandinavia and Germany may, but just about every other place is saddled with super high unemployment. The cause of that unemployment is partly the EUR not allowing them to debase a national currency and the rest is a welfare system that disincentivizes work and reform. In a lot of the Eurozone, it's really hard to lose your paycheck. Even if your productivity blows, even if you don't have any work, the state pays for a lot.

[Renton]

I'd need to see those statistics but there could be a few explanations why that is true. There are a lot of problems with country comparison as there are so many moving parts that causality is very difficult to determine. There are other factors that affect social mobility that aren't at all related to policy. Some countries are naturally richer and more prosperous because they have more resources per capita. Some are because they haven't fought in any wars recently. Mobility in a place like Norway is going to be higher because that's just a rich country to begin with and people are more likely to be born with a head start than a country like America which has more immigrants who have longer to travel through the income brackets from the first.

The other thing is that many socialist countries that ARE prospering in the present are saddling the next generations with massive debt. Yeah if you run the national credit card to its max, people today will get to go to school and have free healthcare and have a better chance of success in life, but is this sustainable? Time will tell.

[wufwugy]

Another thing about mobility is that places like Norway have cultures that are apt to incorporate the unincorporated residents. This is in stark contrast to the US, where we tend to look down on immigrants. Norwegians believe all immigrants should have the same kind of lives as indigenous Norwegians. In that case, it makes a lot of sense why social mobility may be higher

[wufwugy]

To look at this in a macro sense from a different perspective, it may be more productive to redistribute wealth through shaming instead of laws. What I mean is basically peer pressure. It's very real and it is the backbone of tribal societies. Foraging tribes, for example, have zero laws about anything, yet they still have wealth accumulation. This accumulation, however, is never for the purpose of rising above the other tribesmen, but is a part of the process of creating great prestige by giving it to everybody else

I think the same mechanism functions in civilization, but it looks like it doesn't partly because there are so many coercive laws that people hate, and this creates divisions in the culture where people have more of an "us vs them" mentality. Even still, a lot of very wealthy people spend most of their time in charity. The reason they do it is the same as why the most basic hunter/gatherer societies also do it.

Guys like the Kochs are viewed as spinsters who are taking as much wealth for themselves as possible, but even that isn't true. They believe what they're doing is charitable to everybody else. They believe that crushing the government is the best charity they know how to give. They're not wrong. I tend to not agree with the "ends justifies the means" approach, and maybe the Kochs are different, but it could be said that the principle still applies. The "Scrooge McDuck" fable is kinda just a fable. The only agency that steals cash and "sits on it" en masse is the government

[Renton]

Two very short videos illustrating some interesting basic economic concepts.

[Renton]

[wufwugy]

Put a little bit of thought into how Congress could feasibly fix the welfare/subsidy system. It needs fixing more than people think, not because it redistributes wealth, but because of the rent-seeking programs (like farm subsidies) it creates and market distortions (like mortgage subsidies). I do not think that Congress can get anything done if it results in reduced projected dollars. Voters just won't back that since most of them think anytime dollars are taken from welfare, they should instead by made up by taxing the rich.

My conclusion is beginning a universal, unconditional basic income. Not a big one, maybe just $100/mo to start. The bill to do this should include across the board cuts to every other program in existence equaling to $100 per head. This would get a lot of people mad at first, but I think it could be sold to the public, because most people would see a small raise from it. But it would probably still mean that others who receive other benefits, like food stamps, would see a larger decrease, like $120 cut in food stamps but $100 increase in income.

After something tiny like this is established, it would allow Congress to increase numbers and also gradually start adding any needed conditions. The goal would be towards moving towards something like $500 basic income with equal number of decreases in all other welfare. Hopefully from there it could be molded into a scaling subsidy based on work, but that would require once and for all eliminating the hundred other welfare programs.

I don't think this could happen under a Democratic president, but possibly could under a Republican one. The GOP strategy under Reagan and W to reduce government intervention and reduce market distortions were to cut taxes and create deficits to force more reduction, but I don't think this worked well at all. In fact, I think it blew up in all of our faces. Romney may have been heading in the right direction by wanting to close tax loopholes but keep it revenue neutral by reducing rates. He probably could have gotten somewhere with this if he won, even though liberals would hate it since they wrongly think distortions don't cause problems and the only way to squeeze the rich is high rates

It saddens me that, while I agree with the ends of the GOP, I don't with the means, and I think the means has greatly hurt the pursuit of the ends. They want somebody who can just sign papers. Bush was basically that, and having an incompetent president led him to create problems that went unpredicted and get all the blame when something bad happened. What the GOP needs is somebody who sells the reason why markets are better than government and pushes policies that make people see this in real time. I think that includes lots of across the board tax cuts and a shift from multiple welfare programs to a basic income

My hope for the Democrats is teetering since it really is true that they believe government is the solution. Maybe Brian Schweitzer won't, but I don't see how he could beat Hillary in the primaries. I guess my hope is that Rand Paul gets establishment GOP backing and the base stops making a spotlight out of social impositions. The latter sounds harder to do than I think it will be. I've been surprised at how many hyper-religious conservatives are considering that their focus on social issues is why they're losing the presidency.

Rand is probably the only candidate who could beat Hillary. I'd say as of now, in a headsup match they're even. Rand has actually been able to beat her in CO and NH in a couple polls, which is kinda crazy. Any GOPer who wins NH wins the election. By a lot

[wufwugy]

Also the way to fix education is to fail students. I don't know what percentage, but the philosophy should not be "no child left behind". It should be "book learnin aint for erebody". Then eliminate the minimum wage and zoning and price controls and you'll find everybody has a job, wages are rising, education is cheap (ish), and US schools again become the envy of the world

[wufwugy]

Great article by the guy in Renton's Guilded Age lecture

http://www.fee.org/the_freeman/detai...ployed-workers

[Renton]

IMO, a lot of entitlement reform will happen on its own when the state debt becomes too high. At the national level we'll probably see a collapse of medicare and at state levels we'll see the end of public education. Sadly, it will probably require that the states completely bankrupt themselves, but maybe that is what was necessary.

Governments have demonstrated time and time again that they cannot be trusted with managing a multi-trillion dollar budget. Optimistic statists will always suggest that we just need to make reforms and keep improving the government until we have an accountable and efficacious government. But they fail to understand how people and groups respond to incentives and how fucked up the system becomes when that incentive structure is distorted.

[wufwugy]

I hope you're wrong because if you're right it will take foreeeeeeeeeeever. Medicare will be reformed over and over and over before it collapses from "bankruptcy". Sovereign currency governments don't deal with the same kind of credit/debt that everybody else does because they have power over the nominal. The obsession with debt is largely a product of people being trained in "real" numbers and conflating them with nominal, among many other factors. Regardless, our government doesn't truly have any debt because it is its own creditor, and it can reform that "debt" instantaneously or through a myriad of ways. I forget when it was, but at one point we started calling government obligations "debt" even though they aren't debt in the traditional sense, perhaps because the concept in macroeconomics didn't have a better word.

Also I don't see how state education will collapse. Bureaucracies don't ever collapse because of mandatory revenue streams (taxes). A shift away from public education will involve some other market and legislative dynamics IMO

Another thing to keep in mind is that GDP is much higher now than it ever has been, and probably by a lot. We just can't account for it because it's all digital. Friedman was right when he said that as years progress, the internet will make the GDP/taxes ratio bigger and bigger, but he didn't appear to foresee that we wouldn't be able to quantify the difference. This is one reason I think reform isn't necessary, even if it would be helpful. Technological growth eventually defeats bureaucracies. Even if Medicare looks like it will go bankrupt in 30 years or whatever, that doesn't account for the incredible price reductions from technology. I guess the key is to keep prices from remaining artificially high due to regulations

[Renton]

Another very short one.

[wufwugy]

Those videos are fantastic. Caplan is great at describing economics clearly and succinctly

Most of my move away from populist democratic socialism was due to reading Scott Sumner, as I only sorta recently started reading Caplan.

[rong]

Yeah that dude's great.

[a500lbgorilla]

From video: Why are so many voters uninformed?

Bro, this is Thinking Fast and Slow. It's because they're people. Until you train them to frame these problems correctly, they'll always see it from a natural tilt.

If i pretend that the atomic participant in an economy were a firm, who can act rationally because they have dedicated, trained units to acting rationally in all ends, then this all makes effortless sense.

I still have hang ups with pretending that normal people are going to be savvy participants in the marketplace. They're lazy and easy to trick. They'll buy on price and brand and not much else.

Though, I'm not sure that's much of a problem.

[Renton]

From video: Why are so many voters uninformed?

Bro, this is Thinking Fast and Slow. It's because they're people. Until you train them to frame these problems correctly, they'll always see it from a natural tilt.

If i pretend that the atomic participant in an economy were a firm, who can act rationally because they have dedicated, trained units to acting rationally in all ends, then this all makes effortless sense.

I still have hang ups with pretending that normal people are going to be savvy participants in the marketplace. They're lazy and easy to trick. They'll buy on price and brand and not much else.

Though, I'm not sure that's much of a problem.

Markets provide what people ascribe value to. If people value brand over quality then the market will reflect that. But why would we want the market to ignore what people value and provide what they don't value? What signals would businesses have to know if they're providing a satisfactory product if they're ignoring the signals that are plain?

States suppose what is of value, often arbitrarily or based on corrupt means, and make that the law. This is where policies like the war on drugs come from. States mandate that you buy liability auto insurance because they believe they know what you should spend your money on better than you do. States decide that some hugely expensive plot of land in the middle of the city should be a community center or public plaza based on the whims of a city council of like 8 guys who are wholly unaccountable if it turns out to be a bad public investment. Big shock when the building remains empty 270 days of the year or the plaza becomes a place for pigeons to take synchronized shits.

[a500lbgorilla]

"If people value brand over quality then the market will reflect that."

I guess value means two different things. Whatever the market reacts to is value to you. When the same product sells differently based on brand and we know that brand works on familiarity and any number of other influence techniques, I see trickery and not value building.

[Renton]

Well there is definitely an art and science to marketing, but I think its a little bit cynical to state that people buy brand name products because they are being duped into it. There are a lot of good reasons for buying a name brand product. You pay extra for the consistency in quality and the dependability the the brand implies (or often expresses in writing).

The main thing is that we define a line in advertising that constitutes fraud, and provide harsh negative incentives to fraudulent behavior.

[a500lbgorilla]

Well there is definitely an art and science to marketing, but I think its a little bit cynical to state that people buy brand name products because they are being duped into it. There are a lot of good reasons for buying a name brand product. You pay extra for the consistency in quality and the dependability the the brand implies (or often expresses in writing).

The main thing is that we define a line in advertising that constitutes fraud, and provide harsh negative incentives to fraudulent behavior.

It is cynical. There was a reddit post some time back about a guy who used to love an ice cream brand until it was bought out and completely ruined that speaks to where I'm coming from. By the end, they couldn't even call their product ice cream on the box, but they were still making a profit because people don't spend more than 5.6 seconds researching that ice cream choice. Because people are busy and exhausted and worried about more tangible problems on the scale of their life.

[a500lbgorilla]

And I claim it's trickery from the same perspective that the video claimed people didn't agree on ignorance. The hard-fought understanding takes effort and isn't available to everyone. You have to work for it and be trained by clever minds that have earned their way before you.

So the way economists understand economics versus how a lay-person sees it is somehow analogous to almost every economic decision people are forced to make. Unless you're working hard to spend every red cent well, you're susceptible to being duped.

If no one is working hard to solve the problem of the best pizza to buy, and instead everyone is competing on putting the cheapest yet most cheese like cheese substitute inside the sleekest box, no one is really benefiting from the markets choices. (well not no one, but we're not headed toward the best of all worlds, in my humble opinion).

[a500lbgorilla]

http://www.reddit.com/r/AskReddit/co...er_buy/cg4ob7o

Thank you, google.

http://www.statista.com/statistics/1...united-states/

And thank you, google.

[Renton]

I think products are certainly getting better over time, at least in general. Yes, they improve their packaging and marketing to be sure, but in order to compete they have to improve every possible metric.

Look at fast food restaurants, the generally accepted kings of shitty corporations that do nothing but harm in the world. Most chain burger joints now boast that they use angus beef or applewood smoked bacon. There's been a huge shift toward providing healthier options at these places. Arby's used to sell roast beef sandwiches only when I was growing up, now they are pretty much a full fledged deli. Last week they unveiled a new brisket sandwich that claims to use beef brisket that has been smoked for 13 hours or something.

McDonald's is facing pressure to start using real beef instead of the now infamous pink slime shit. They don't need a state to figure out that their business will begin to suffer if they don't make changes. This is the market in action.

[a500lbgorilla]

I think products are certainly getting better over time. Yes, they improve their packaging and marketing to be sure, but in order to compete they have to improve every possible metric.

Look at fast food restaurants, the generally accepted kings of shitty corporations that do nothing but harm in the world. Most chain burger joints now boast that they use angus beef or applewood smoked bacon. There's been a huge shift toward providing healthier options at these places. Arby's used to sell roast beef sandwiches only when I was growing up, now they are pretty much a full fledged deli. Last week they unveiled a new brisket sandwich that claims to use beef brisket that has been smoked for 13 hours or something.

McDonald's is facing pressure to start using real beef instead of the now infamous pink slime shit. They don't need a state to figure out that their business will begin to suffer if they don't make changes. This is the market in action.

"Most chain burger joints now boast that they use angus beef or applewood smoked bacon."

Well, my point on the money. They boast. Then you go and buy one and it doesn't live up to the dream. But fuck it, it's all that salt and fat your body is salivating over.

Things get "better" much faster than they get better.

[Renton]

Chain fast food places attempt to provide quality food quickly at a price point that is below that of normal restaurants. The ones that perform the best in that duty will be the ones that remain for the next years. The quality of food at these places has without a doubt gone up since I was a child. It's obviously still shit compared to what you could prepare at home, and I still only eat at these places a couple of times a year, but its not gourmet home cooking that they're trying to compete with. There's a separate market for that sort of food.

People are going to have bad habits and addictions and they're going to make mistakes with their money no matter what you mandate from the top down. There's just a very fine line where you go from acting in the best interests of people to legislating your own good taste on them. I tend to lean toward the "more freedom" option in these exchanges.


edit: also it's a huge matter of opinion whether the food served at these restaurants is unhealthy. If you're an extremely poor person eating one meal a day, I'd rather that meal were an super calorie dense big mac loaded with fat, carbs, and protein than if the alternative were a fruit smoothie with flaxseed oil. People are unhealthy from eating fast food because they eat entirely too much of it for their activity level. So if you want to prevent the latter thing from happening, you're going to have to take away some freedoms, much of which will be from legitimate and capable people who don't need a government to hold their hand as they drive through the mild temptations of a McDonald's parking lot.

[a500lbgorilla]

Yeah, I'm just sounding off. I have none of these 'solutions' you seem to have all over the place. And I will readily recognize it's much easier to sit in my seat than yours.

[Renton]

I feel like I am uniquely positioned to argue in favor of capitalism because I used to be a progressive liberal who believed all of the same things that boost and rong believe. It has taken me a while to move to the other side so I don't want to bully people into accepting my point of view. My main goal in this thread is to simply dispel all of the fallacies that armchair anti-capitalists fall prey to.

I definitely don't have all the answers, I just want to attempt to have a discussion that is as fallacy free as possible.

[rong]

I can't find any examples beyond the frequently mentioned betamax vs vhs (which I know nothing about or if it is fact) but aren't there many examples of an inferior product winning out down to marketing? I mean, fuck, cigarettes are a good example of marketing at it's worst.

Due to the variety of products we all consume there is no way to be an expert and actually choose optimally all the time. Now I get your answer is review sites or similar but they can't necessarily be trusted so I don't see a huge downside to having a group who you know are acting in your best interests, ie the government (in theory), regulating things to ensure minimum standards, certainly with things like cars or gas fired boilers.

[a500lbgorilla]

I can't find any examples beyond the frequently mentioned betamax vs vhs (which I know nothing about or if it is fact) but aren't there many examples of an inferior product winning out down to marketing? I mean, fuck, cigarettes are a good example of marketing at it's worst.

Due to the variety of products we all consume there is no way to be an expert and actually choose optimally all the time. Now I get your answer is review sites or similar but they can't necessarily be trusted so I don't see a huge downside to having a group who you know are acting in your best interests, ie the government (in theory), regulating things to ensure minimum standards, certainly with things like cars or gas fired boilers.

Cosmos mach 2 and the leaded gas is also a good example.

[wufwugy]

I can't find any examples beyond the frequently mentioned betamax vs vhs (which I know nothing about or if it is fact) but aren't there many examples of an inferior product winning out down to marketing? I mean, fuck, cigarettes are a good example of marketing at it's worst.

Due to the variety of products we all consume there is no way to be an expert and actually choose optimally all the time. Now I get your answer is review sites or similar but they can't necessarily be trusted so I don't see a huge downside to having a group who you know are acting in your best interests, ie the government (in theory), regulating things to ensure minimum standards, certainly with things like cars or gas fired boilers.

The need to choose expertly is a strawman view of capitalism. Maybe some economists have led people to believe in that view, but it is wrong and I doubt they intend to. Markets work because choices are yours and consequential to you. There is no better mechanism by which to spend your capital than for you to do it and for you to reap the rewards or losses. The same is true of everybody else. The fact that we're all mushed together in communities doesn't change that.

Capitalism = democracy if "democracy" were to be defined as "voting everyday, multiple times a day, for what you think is the right thing for you, those around you, and the world". When it's boiled down to brass tacks, no pie-in-the-sky view that you will cast a ballot for a politician who will fix worldly problems that you aren't yourself willing to pay for (like homelessness in India or schools in Austin, Texas) could even work in the first place. What works is a reflection of your dollar, my dollar, and everybody else's dollar. This is because our dollars are a manifestation of our capital, and our capital is a manifestation of our efforts. Governmental politics is an attempt by ourselves to thwart our own capital allocation. It's schizophrenia

And I just watched Friedman being interviewed discussing car safety and explaining how we should all have the right to value our safety individually but I don't feel qualified to make that decision and also, in the example of car safety, you're risking other people's lives too.

But you have made the decision. You make it everyday. You choose to drive to work, to the store, to recreational locations. The risk of dying on those drives exists. You could choose to move closer to those destinations so you could drive less or bike or walk, and you would reap the benefits of a lower risk of automobile-caused death or injury. The decision is already in your hands and it always has been. Friedman's point is this as well as those who seek regulations on the issue are doing so arbitrarily and forcing them on others.

Every car manufacturer knows of a thousand different ways they could make their cars safer, and they address them only when the cost/benefit analysis shows that they should. This exists in every industry you can think of. Government intervention does not perform a better cost/benefit analysis. Even if we wanted to solve some of these problems with regulations, we couldn't. Instead, we would be creating more problems by reducing the freedom to choose, creating distorted market incentives (like the ones that created that whole housing crisis), and hindering mechanisms that solve the problems

[a500lbgorilla]

I feel like I am uniquely positioned to argue in favor of capitalism because I used to be a progressive liberal who believed all of the same things that boost and rong believe. It has taken me a while to move to the other side so I don't want to bully people into accepting my point of view. My main goal in this thread is to simply dispel all of the fallacies that armchair anti-capitalists fall prey to.

I definitely don't have all the answers, I just want to attempt to have a discussion that is as fallacy free as possible.

Dude, I love you for it. I'm always interested to learn and am committed to understanding this stuff better. You present yourself like you've managed to win a hard fought understanding and so I have been investing genuine time these past several months in pivoting from my thinking closer to yours.

I didn't read Thinking Fast and Slow for fun. Well, I did. But I'm trying to come from my familiar world of skepticism towards economics and it was a good bridge. I've also been drinking up some Schelling and some Coase in the same time. I'm working my way into econ proper.

Slow and steady and I've got to wrestle with it the whole way. That's how hard fought understandings are earned.

edit does anyone ever just feel like rong gets in the way?

edit edit lol my edit joke looks bad on re-read.

[rong]

And I just watched Friedman being interviewed discussing car safety and explaining how we should all have the right to value our safety individually but I don't feel qualified to make that decision and also, in the example of car safety, you're risking other people's lives too.

[wufwugy]

Rilla

In the Caplan lecture, he doesn't mean to judge lay people for not understanding economics, but for treating economics like they do understand it when they don't have any reason to. You don't have an opinion on how to perform heart surgery because you don't know anything about it (I'm assuming), but if heart surgery was economics and you were the average person, you would have an opinion on it. A very strong opinion. This isn't that solvable a problem because the populace is forced to have an opinion due to living in a voting democracy. One of Caplan's takeaways is that capitalist interests have softened the blow of this, and it is possible we could create more progress by allowing mechanisms of expertise take precedence in policy-making

A different point you've been making is what I think is making the perfect the enemy of the good. For example, if your pizza analogy is assumed to be exactly as you say it, what is the other solution? Regulation of tastes? Regulation of ingredients? I think it is safe to say that the only mechanism we've found that can raise the quality of pizza is capital markets. Even if there may come to be an overabundance of poor quality pizza, that doesn't mean that government could do a better job. You do a better job with your dollar and preferences. I do a better job with my dollar and preferences. The guys who seek our business do a better job with their dollar and preferences. The system isn't perfect in an ideal sense, but water doesn't perfectly flow downhill in an ideal sense either. Adding government to the mix of pizza will not solve any problems. Unless, of course, you can find problems it would solve. Acknowledging that problems exist in pizza doesn't mean the markets aren't working

Furthermore, the markets are working with pizza. It's one of the best examples that could be used to extoll the virtues of capitalism. The amount of people employed in the industry is enormous. It started small, with some wheat and tomatoes, and now it's the most popular food in the modern world, with the widest variety. You can get it super cheap at the store, have it delivered to your home, or have freshly made boutique styles at restaurants. The possibilities are incredible, and if anything is holding growth an innovation of the industry back, it's regulations that create too much red tape and business operation costs. Jon Stewart once had a New York style vs Chicago style segment. You can't get that without capitalism.

Markets aren't without their characteristics. If we want a Utopia where one company gets so powerful that it hinders progress for a while, and this can be well-regulated against so that market processes keep these companies from arising, we're not going to get it. Microsoft is a fantastic example of this. Back in the 90s, it looked like a juggernaut that would control computers and the internet and the government did something about it. But looking back, the regulations had zero effect on the companies that have now arisen and made Microsoft one of the underdogs. People tend to view size and power as nothing but a strength, so it makes little sense how something so big and powerful could fall to something weaker, but the details show that incumbency advantages also create dire weaknesses. A great example of this is how Walmart is unable to compete with Amazon's emergence in grocery delivery because doing so would harm Walmart too much since B&M retail is its bread and butter. The rise of Google and Amazon in a world with major incumbents in Microsoft and Walmart are a testament to the fact that markets work and that regulations don't


Something a little more abstract to think about: if what you pay for with your capital doesn't reflect your moral values the most, what does? I haven't found anything

[wufwugy]

Sorry for the monster poasts, but I totes malotes had to jump in

[rong]

So on the one hand, economics is something that the average person can't realistically be an expert in yet is forced to be via our voting system, and this leads to non-optimal economic and policy decisions. But at the same time we make a million decisions a year with our dollar in things we aren't expert in yet this is somehow optimal.

Doesn't this demonstrate a hole in this argument? I don't, can't, dispute that a capitalist model efficiently allocates capital and leads to growth, innovation and clear improvements in living standards across the board. But a lot of this debate focuses on finding examples of situations where capitalism free markets aren't optimal and it seems to me the asymmetry of information in a world with products of growing complexity will lead to greater suboptimal decision making which will eventually reach a point whereby it is no longer efficient and the standard argument of corporate greed and companies having both a huge incentive and an easy opportunity to effectively mis-sell and deceive consumers leading to poor products, less innovation and therefore inefficiency.

This kind of ties in with my completely unfounded theory that capitalism and free ish markets ate optimal for a while but eventually need to be replaced with something that protects the public from powerful corporations and the harm their self interest will cause.

[wufwugy]

So on the one hand, economics is something that the average person can't realistically be an expert in yet is forced to be via our voting system, and this leads to non-optimal economic and policy decisions. But at the same time we make a million decisions a year with our dollar in things we aren't expert in yet this is somehow optimal.

I don't think it is a contradiction because the votes are for entirely different things. The former is expecting voters to understand complexity, the latter is expecting consumers to consume.

Doesn't this demonstrate a hole in this argument? I don't, can't, dispute that a capitalist model efficiently allocates capital and leads to growth, innovation and clear improvements in living standards across the board. But a lot of this debate focuses on finding examples of situations where capitalism free markets aren't optimal and it seems to me the asymmetry of information in a world with products of growing complexity will lead to greater suboptimal decision making which will eventually reach a point whereby it is no longer efficient and the standard argument of corporate greed and companies having both a huge incentive and an easy opportunity to effectively mis-sell and deceive consumers leading to poor products, less innovation and therefore inefficiency.

Greed is good. Self-interest drives everybody's decision-making naturally. It is when this greed is met with competition from the greed of others that capitalism arises. In competitive markets, deception of customers does exist but it doesn't survive. For all we can tell, any market without too much government intervention is competitive. Two examples of this are Amazon beating up the previous monster-incumbent in Walmart and Google coming after ISPs.

This kind of ties in with my completely unfounded theory that capitalism and free ish markets ate optimal for a while but eventually need to be replaced with something that protects the public from powerful corporations and the harm their self interest will cause.

The above mostly addressed this, but I'll reiterate: I do not think this is problem. Centralized power doesn't appear to be a function in markets, but one of governments, by design and by regulatory capture. I believe if we had a government that was constitutionally restricted from intervening in any area that wasn't directly about unwillful coercion (like murder or mugging), then we would find there are no single companies with anywhere close to enough power to lord it over the consumers.

Comcast and Time Warner are among the best possible examples for this. Their power over the consumer is not a product of their size, but a product of governments. The barrier to entry into the ISP market is extremely high, costly, and layered in complexity because of regulations. Like I said before, if it wasn't for municipalities protecting voting incumbents and a variety of other regulations on all levels, Google Fiber would already be everywhere and Comcast would have to compete or die. The ISP scenario is slowly evolving because government intervention is hindering production big time, but it still is evolving. Apple probably would have jumped in too, as well as others. Nobody wants to do it because it's a legal nightmare now. Google is only doing it because their business model allows them to lose on Fiber as long as it forces incumbent ISPs to increase speeds, which increases Google's bread and butter: searches and ad revenue


The food industry is a great example of how everything has worked. There are some enormous corporations involved, yet because the market is relatively free, the competition is fierce, and any company that attempts the slightest bit of screwing the customer would suffer immensely. The biggest problem in food today are regulations like food subsidies and barriers to entry. The subsidies are greatly distorting what gets produced and sold, which is hindering all sorts of things like costs of other foods and innovation in products. There are many other barriers like Sabra is just now trying to get the government to make it illegal to call something "hummus" if it doesn't contain a certain amount of chickpea or something. This is bullshit and the reason we can't have nice things

The most dangerous incumbent by far is government. Even with government intervention, the biggest problem is the voters, not the companies. Voters create far, far, far bigger regulatory captures and market distortions than any companies. Why is education fucked and hyper expensive? The causality shows it's the voters, not businesses. Voters want bullshit like "no child left behind". Businesses want the opposite. It is very crazy how the vast majority of negative economic and social policies reflect the desires of the voters, yet the voters turn around and blame it on businesses. "Business" isn't even the good guys. Individual businesses love the idea of regulatory capture and rent seeking, but they can't get that without governments. Without governments even the biggest business conglomeration around today don't have a fraction of the capital it would take to coerce consumers. The market is the good guy. Think of the internet. It has always worked best when completely unregulated by a centralized power. Why is the rest of society different than the internet? The internet has permeated every aspect of human society and can be said to almost perfectly reflect what it means to be human society, and we have discovered that un-regulation works best

I do not think centralization of power and incumbents coercing consumers is a problem in capitalism. Those things happen via government, be it a dictatorship or a democracy

[CoccoBill]

This conversation seems to suffer from the same polarization affecting everything today. I'm not sure I've actually witnessed anyone advocating totalitarianism in favor of capitalism, the benefits of free trade are undeniable. The discussion is just on whether the market should be absolutely no-holds-barred laissez-faire free as a bird, or whether some basic restrictions to govern against unhealthy and (for lack of a better term) unethical practices should be in place. I'm not convinced the former is the correct answer. Either way, while the difference between those two is substantial, we aren't talking apples vs oranges, just some meta details.

[a500lbgorilla]

Hey wuf,

I see where you're coming from. I prefer to think of it myself as understanding the build and where it works and where it doesn't work.

[wufwugy]

Hey wuf,

I see where you're coming from. I prefer to think of it myself as understanding the build and where it works and where it doesn't work.

Think of it like evolution. Natural selection exists because individuals mutate and choose breeding partners, and this all happens within large populations. The market mechanism is the same. Individuals acting freely and with self-interest within a population of others doing the same creates an evolving competitive market

[a500lbgorilla]

Think of it like evolution. Natural selection exists because individuals mutate and choose breeding partners, and this all happens within large populations. The market mechanism is the same. Individuals acting freely and with self-interest within a population of others doing the same creates an evolving competitive market

Any system will evolve given rules and time. The reason we can speak about evolution so robustly is because we can apply the scientific method to it. Economics is not the same and it cant be studied the same way.

So it's an evolving system, sure, but you can't think of it like evolution.

[wufwugy]

Any system will evolve given rules and time. The reason we can speak about evolution so robustly is because we can apply the scientific method to it. Economics is not the same and it cant be studied the same way.

So it's an evolving system, sure, but you can't think of it like evolution.

I don't mean that the system evolves, but that the system functions similarly to biological evolution. The dynamic of natural selection isn't much different characteristically than what we could call consumer selection or product selection or whatever. Simplifying evolution, we have two factors: environment and mutation. These factors interact and the most able to succeed do while the others die. This doesn't create perfect specimens. Instead it creates all sorts of whack specimens. But our attempts to engineer something better with similar complexity has come as close to success as a doberman is to inventing wormhole travel.

Markets are the same. Two factors: production and consumption. They interact for a spell then the companies and consumer behavior that is most able to succeed, does. If we're sticking to this analogy, government is sorta like eugenics. Wherever it regulates, it chooses the winners and losers, not based on their own merits, but based on arbitrary concerns of the government and effects (predicted or unpredicted) of the regulations.

[a500lbgorilla]

I don't mean that the system evolves, but that the system functions similarly to biological evolution. The dynamic of natural selection isn't much different characteristically than what we could call consumer selection or product selection or whatever. Simplifying evolution, we have two factors: environment and mutation. These factors interact and the most able to succeed do while the others die. This doesn't create perfect specimens. Instead it creates all sorts of whack specimens. But our attempts to engineer something better with similar complexity has come as close to success as a doberman is to inventing wormhole travel.

Markets are the same. Two factors: production and consumption. They interact for a spell then the companies and consumer behavior that is most able to succeed, does. If we're sticking to this analogy, government is sorta like eugenics. Wherever it regulates, it chooses the winners and losers, not based on their own merits, but based on arbitrary concerns of the government and effects (predicted or unpredicted) of the regulations.

You're missing a rather subtle point. There is a reason why our understanding of evolution is robust and predictive in ways that our understanding of economics isn't.

We have a mechanism to calibrate our modeled understanding of evolution. It's the mechanism that allows us to discover and describe genetics. We can guess and check via the scientific method. Which is not something you can do with economics. Because you can't experiment with an economy like you can with living organisms. Economies are hard to observe, hard to isolate, hard to play with.

Science has a way to discover the mechanism of heredity/mutation/speciation - DNA. Economics does not yet have a way to discover the mechanism of the invisible hand/benefitial competition/whatever we're doing.


From VS Ramachandrans explanation of Crick and Watson's discovery of DNA


"It is well known that Crick and Watson unraveled the double helical structure of the DNA molecule: two twisting complementary strands of nucleotides. Less well known is the chain of events culminating in this discovery.


First, Mendel's laws dictated that genes are particulate (a first approximation still held to be accurate). Then Thomas Morgan showed that fruit flies zapped with x-rays became mutants with punctate changes in their chromosomes, yielding the clear conclusion that the chromosomes are where the action is. Chromosomes are composed of histones and DNA; as early as 1928, the British bacteriologist Fred Griffith showed that a harmless species of bacterium, upon incubation with a heat-killed virulent species, actually changes into the virulent species! This was almost as startling as a pig walking into a room with a sheep and two sheep emerging. Later, Oswald Avery showed that DNA was the transformative principle here. In biology, knowledge of structure often leads to knowledge of function—one need look no further than the whole of medical history. Inspired by Griffith and Avery, Crick and Watson realized that the answer to the problem of heredity lay in the structure of DNA. Localization was critical.


Crick and Watson didn't just describe DNA's structure, they explained its significance. They saw the analogy between the complementarity of molecular strands and the complementarity of parent and offspring—why pigs beget pigs and not sheep. At that moment modern biology was born."


Ain't nothing like this in any of the economic literature I've ever seen. And if there is, I desparately want to read it.

I hesitate to make this point because it becomes a very harried discussion from here on out that calls back to the philosophy of science that no one in their right mind would want to get in to, but this is the core of my difficulty with economics. I know why I can trust the theoretical explanations underlying the behavior of planes, but not why I should trust similar explanations for the behavior of unregulated free markets.

[rong]

So do you think their should be no regulation with regard to safety standards in cars? We currently have minimum requirements in the build of a car and also legal requirements for annual safety testing. Is this an example of government regulation (i may be barking up the wrong tree) and do you think this is a bad thing?

[wufwugy]

So do you think their should be no regulation with regard to safety standards in cars? We currently have minimum requirements in the build of a car and also legal requirements for annual safety testing. Is this an example of government regulation (i may be barking up the wrong tree) and do you think this is a bad thing?

Yes. If there is ever a role for regulations, it's for safety in ways that otherwise would not be addressed. The question then becomes whether I think safety issues would be addressed by markets. I think the answer to that is yes.

People talk, publications exist, insurance companies employ actuaries. Catastrophe is major news. If a car or a company gets labeled as lax on safety, it's virtually a death sentence. The incentive to fix safety problems proactively and retroactively is huge, and I think would be even bigger in a free market since consumers would believe that companies are solely responsible for their own problems instead of turning attention to government to solve the companies' problems.

Government imposed safety regulations are unlikely to solve any problems since they don't reflect an ever-changing environment. Consider drugs. The regulations made on them were made a long ass time ago in a different world. Today we do not live in that world, yet the regulations still impose the ramifications of that world on us. If we let markets solve drugs, everything would work just fine back in a world where people didn't wanna consume them, and everything would also work just fine in the world today where people do want to consume them. In areas where the regulations work, they're not needed because the consumers would have already gotten the problem fixed by voting with their dollars. In areas where regulations don't work, they just increase costs, reduce innovation, and decrease stability through distorted incentives. In severe cases, which are all too standard for governments, regulations destroy lives by the millions (unjust war and imprisonment for drugs, to name just two of the many)

Answer this question: why do food/car companies recall faulty products: to appease the government or save their own bacon with consumers?


Even if we believe that markets don't solve safety problems perfectly (a reasonable belief), does that necessarily mean that government does any better? I think the answer is an emphatic no. Look at it this way: which organization's accountants perform better cost-benefit analyses: a company selling product in the industry or a government bureaucracy that oversees only what it legislatively is required to?

[CoccoBill]

Government imposed safety regulations are unlikely to solve any problems since they don't reflect an ever-changing environment.

Why is that, what is stopping them from changing? Your argument is more against bad/rigid governance and policies than governance and policies themselves. Personally I'm not for bad governance or shitty regulations, only for the ones that are necessary, actionable, fair and efficient. Obviously achieving those isn't trivial, but I'm not convinced it's impossible.

Answer this question: why do food/car companies recall faulty products: to appease the government or save their own bacon with consumers?

Both. A faulty/dangerous product gets recalled fast after the fault is discovered by the public, before that there is zero incentive to do that. There are numerous examples where companies deny any faults in their products when their existence is painfully obvious to everyone else. Answer this question: Why would a company's executive recall a product with a major flaw, causing major financial losses and damage to the company's public image, when the flaw would without rigorous testing only manifest itself after several years if at all, after the executive has already left the company?

Even if we believe that markets don't solve safety problems perfectly (a reasonable belief), does that necessarily mean that government does any better? I think the answer is an emphatic no. Look at it this way: which organization's accountants perform better cost-benefit analyses: a company selling product in the industry or a government bureaucracy that oversees only what it legislatively is required to?

Those are people working both for the public and private sectors, there's nothing inherently different in their analytic capabilities. Their incentives and goals, however, differ. The accountant at the private company is (perhaps directly) incentivised to maximize their company's profits, say by finding/creating loopholes in their own policies, whereas the goal for the public sector accountant (albeit indirectly through their motivation to adhere to their instructions) is to ensure product safety, ethical practices, legality etc. I don't doubt that the markets will adjust, in time. I just wonder how long people will have to breath leaded air and eat leaded toys waiting for that to happen.