Dat inequality

[Renton]

Don't you see the built-in contradiction there? 1) Value is determined by voluntary exchange. 2) Governments circumvent the voluntary exchange mechanism to provide public services to people.

I agree that every modern society is leaning toward socialism, but wouldn't you agree that nearly every country is in insurmountable debt because of this? Is every single government in the world terrible at spending money or is there a basic principle that makes it inevitable for them to bankrupt society?

It is pretty fruitless to argue this stuff on a macro scale, but we can easily perform basic economic experiments on single people or small groups of people. It is obvious, for example, that humans will use a resource differently when it is free than when they pay for it. People on food subsidy programs are extremely likely to spend their entire stipend in one sitting at the grocery store on things that they don't particularly need. They have very little incentive to be frugal, use coupons, choose non-name brand products, or conserve in any way. (anecdote alert) My aunt spends her food stamp card buying like four 24 packs of monster energy drink for her kids. Would she do this if she were spending her own money?

So we can pretty much take for granted the concept that people spend other people's money poorly on themselves. The incentives are very clear cut. If I spend 20 dollars on a gift for you, I am pretty likely to put some thought into that gift. If I give you 20 dollars to buy something for yourself, you're going to spend that money a lot differently (on average) than you spend the 20 dollars that was already in your pocket.

These negative incentives are amplified when you're spending someone else's money on someone else. If I give you 20 dollars to buy something for your friend's birthday, you're less likely to spend that money thoughtfully than if it were your own money. If I write you a blank check to get that gift, the negative incentives are even greater. You are in no way accountable for the results of this gift. You have no need to be frugal, to try to get a good deal. You have no need to even really care if the other person liked the gift, as he can just return it and pocket the money. These are all core problems with the collectivist model. Can you tell me in similarly simple terms how voluntary exchange can cause such harm to the exchangers?

While collectivism held sway, the global GDP was a stagnant horizontal line for the first 199,850 years since homo sapiens emerged, and then a sharp nearly vertical spike for the last 150 thanks to a sudden injection of individual rights and free enterprise. This unbelievable progress is met with nothing but skepticism and scorn by most scholars. Scholars with the brass-plated balls to state that we consume too much, that our standard of living is too high, that money shouldn't determine everything, and that free trade exploits poor people and children. Scholars who would do well to reacquaint themselves with the default state of humanity: abject poverty, hunger, and a miserable struggle to acquire the absolute basics of life support.

[CoccoBill]

^You're now talking about certain methods of income redistribution, not really about free markets vs regulated markets. I think these, while related, are completely separate issues. As a direct answer to your question, yes, there is a contradiction, because people cannot value things correctly when they don't have both all the necessary information about the value of things, and adequate skills and knowledge to evaluate that information. The more complex things become, requiring specialized knowledge and skills, the harder it becomes to assess things correctly.

Government is a company, just like any other, although it happens to be (in theory) owned by everyone, and it has the capability to rewrite the rules of the game. The rules that govern this company, its managers and employees, do not differ, in principle, from those that govern private limited companies, unless the rules are changed to either favor or handicap one or the other. Agree? So just like for the employees of the private company, there needs to be controls in place to make sure the worker does his job properly, regardless of his/her self-interests, and whether they're working for a public or private organization. Working for a company does not equate just dealing with your own cash and personal direct responsibility, the checks needs to be in place in both cases. Actually I'd even go as far to say, having worked both for the private and public sector, that in a public sector job I'm MORE inclined to do what's good for the general population, since it IS my tax money I'm dealing with, whereas in a private company I am less concerned about the future of the company, since if it does go under, another one will replace it and most people won't even notice. Operating a one man shop or acting as a major shareholder in a corporation are special cases.

[Renton]

As a direct answer to your question, yes, there is a contradiction, because people cannot value things correctly when they don't have both all the necessary information about the value of things, and adequate skills and knowledge to evaluate that information. The more complex things become, requiring specialized knowledge and skills, the harder it becomes to assess things correctly.

I think you may be missing my point. The value isn't an unknown constant that someone or some committee can ascertain with adequate knowledge. It is a variable in constant flux that can only be known for a given individual based on that individual's preferences, needs, and/or priorities. The same item is often worth more to one person than to another, or worth a lot at one point in time but nearly worthless an hour later. You say that individuals cannot value things correctly. I say that individuals are the ONLY ones who can value ANYTHING correctly. States exist primarily to separate people from the true costs of their lifestyles and to keep the deception up that you can get something out of nothing.

Government is a company, just like any other, although it happens to be (in theory) owned by everyone, and it has the capability to rewrite the rules of the game. The rules that govern this company, its managers and employees, do not differ, in principle, from those that govern private limited companies, unless the rules are changed to either favor or handicap one or the other. Agree? So just like for the employees of the private company, there needs to be controls in place to make sure the worker does his job properly, regardless of his/her self-interests, and whether they're working for a public or private organization. Working for a company does not equate just dealing with your own cash and personal direct responsibility, the checks needs to be in place in both cases. Actually I'd even go as far to say, having worked both for the private and public sector, that in a public sector job I'm MORE inclined to do what's good for the general population, since it IS my tax money I'm dealing with, whereas in a private company I am less concerned about the future of the company, since if it does go under, another one will replace it and most people won't even notice. Operating a one man shop or acting as a major shareholder in a corporation are special cases.

I think I can get somewhere with this. Comparing a government to a private company is key to a few insights about the incentives bearing down on each. I think you're wrong to look at it from the point of view of the worker and his self interest. I think the capacity for corruption is about the same for either.

As far as employee incentives against unethical behavior, the comparison is pretty mild. The private employee stands to lose his job and his reputation, as does the public employee. I might argue that public employees are a lot harder to fire, on average, which lessens their disincentives significantly. However, most states have imposed (unjustly so) significant barriers to fire in the private sector as well, so we'll just call that a wash.

The comparison becomes more stark when you move up the chain of command. While it is OK to compare a government to a corporation, its important to recognize a dis-economy of scale that is inherent in governments. Governments are very large, the major governments of the world dwarf the largest corporations in size, and to a degree this results in less accountability for mistakes and unethical behavior. Simply put, a government is able to withstand a lot more heat and public shame than a corporation is. And a government doesn't stand to lose as much from a damaged reputation. Governments are predicated on coercion; you can vote the president or prime minister out of office but the core of government is eternal. Governments require coups to topple. Corporations simply topple when they become un-competitive with other corporations, before the first salvo ever needed to be fired.

So back briefly to the worker, the public service worker stands to lose his job if he's corrupt, and perhaps punishment will spread to his immediate superiors, but all in all the government will emerge unscathed. Conversely, the private sector worker is in much greater ways a proxy for the owner of that corporation. Private enterprise walks a razor thin edge to remain in a competitive market so the incentives against incompetent, unethical, or corrupt behavior are abundantly in evidence. I have more to say about this if you want to hear it but I'm trying to keep my posts short.

[CoccoBill]

I think you may be missing my point. The value isn't an unknown constant that someone or some committee can ascertain with adequate knowledge. It is a variable in constant flux that can only be known for a given individual based on that individual's preferences, needs, and/or priorities. The same item is often worth more to one person than to another, or worth a lot at one point in time but nearly worthless an hour later. You say that individuals cannot value things correctly. I say that individuals are the ONLY ones who can value ANYTHING correctly. States exist primarily to separate people from the true costs of their lifestyles and to keep the deception up that you can get something out of nothing.

I get your point, you mean value in exchange and I mean value in use. What I mean by value is the "objective" consensus value that the market would assign to something when all relevant information was known to everyone, not just the value for the highest bidding fool.

While it is OK to compare a government to a corporation, its important to recognize a dis-economy of scale that is inherent in governments. Governments are very large, the major governments of the world dwarf the largest corporations in size, and to a degree this results in less accountability for mistakes and unethical behavior. Simply put, a government is able to withstand a lot more heat and public shame than a corporation is. And a government doesn't stand to lose as much from a damaged reputation. Governments are predicated on coercion; you can vote the president or prime minister out of office but the core of government is eternal. Governments require coups to topple. Corporations simply topple when they become un-competitive with other corporations, before the first salvo ever needed to be fired.

Again, these may be valid arguments against the current US government and even many other implementations, but I don't believe any of this is something inherent to governments. Besides, at least in theory, democratic governments and toppled by voting.

So back briefly to the worker, the public service worker stands to lose his job if he's corrupt, and perhaps punishment will spread to his immediate superiors, but all in all the government will emerge unscathed. Conversely, the private sector worker is in much greater ways a proxy for the owner of that corporation. Private enterprise walks a razor thin edge to remain in a competitive market so the incentives against incompetent, unethical, or corrupt behavior are abundantly in evidence. I have more to say about this if you want to hear it but I'm trying to keep my posts short.

Please do.

[Renton]

Please do.

I will try not to present everything in public vs private dichotomy but it will sometimes be necessary. For one thing, the primary difference between a public service and a private one is that the public one is almost always an enforced monopoly. In cases where isn't an outright monopoly, there are measures put in place to insure that no private service can truly compete with them, and it is impossible for citizens to determine the true costs of the public service.

Take fictional tire manufacturer Tirez Are Us for example, hereafter referred as Tirez. That Tirez must compete with other tire companies is the single most important force against corrupt or incompetent business practice. In order to make a profit in a competitive market, Tirez has to provide a product or service to the consumer at a price he is willing to pay next to the alternatives, and if the consumer isn't satisfied with that exchange, he will choose another provider. This pressure is ever-present in a free market, and its more than what's immediately apparent. Clearly, Tirez must provide either a higher quality or lower priced tire to compete with other tire companies, but even if the company has 100% market share in an area, it still has to compete with the specter of a competitor yet to arrive. If Tirez is ripping off and defrauding consumers in an area where it is the only provider for 100 miles in every direction, then Tirez's rapidly tarnishing reputation and high prices will create a large profit signal for competitors to enter the area and carve out a foothold for themselves.

Even if some tyrannical mega-corporation merged with Tirez and dominated every aspect of the tire economy, from rubber extraction, to manufacturing, to distribution, and the entire automobile economy to boot, they still would face market pressure not to rip people off. This is because of substitution. People have other means to travel. There are other materials that tires could be made from than rubber. Consumers have the capacity to substitute a nearly infinite amount of products for products less available, and this makes it literally impossible for such corruption and fraud to run rampant in the private sector. It is only through state-sanctioned means that companies have any power to run amok in this way.

So that covers competition, the primary market force that keeps everyone honest that only can be prohibited by states. The other common argument is that we need state-based watchdog institutions to make sure that our private providers give us safe and effective products. Well aside from competition, if people value the peace of mind that comes from such a service, it isn't as if watchdogs are incapable of emerging in a free market. The simplest examples of these are websites like yelp and tripadvisor, but those examples are kind of superficial and not likely to satisfy the more left-minded people. A somewhat better example is the Better Business Bureau.

Nearly 400,000 local businesses in North America support the BBB.^[4] The BBB invites successfully vetted businesses to become dues-paying Accredited Businesses that pledge and continue to adhere to the BBB Code of Business Practices.^[6] In return, the BBB allows Accredited Businesses in good standing to use its trademarked logo in marketing materials.

The effectiveness of the BBB in preventing unethical business practices notwithstanding, this is at the very least proof that business are willing to pay to be be policed, and by extension, their customers are willing to pay for the privilege of knowing whether a business meets a stated list of minimal standards.

This model could very easily extend to a forthcoming private corporation that fills the role of currently state-run departments of health inspection. Provided that customers who eat at restaurants or buy from grocery stores value knowing whether said businesses are on the up and up, those businesses will pay a company to do random health inspections and keep an up to date health score. As such inspection services would exist in a private context of ever-present competition, they would be similarly forced to provide an effective service. Eventually, businesses would highly value the seal of approval that comes from a prestigiously pre-eminent inspection company, and would be foolish not to seek one. Needless to say, this would all come at a decreased cost to the bureaucratic state-based alternative that has much fewer incentives to increase the quality or reduce the cost of its work to the consumer.

[CoccoBill]

Take fictional tire manufacturer Tirez Are Us for example

I understand all this, as I've said the advantages of free competition for efficiency are clear, it's not this I'm concerned about. Also I'm not convinced that public sector operations unavoidably lead to inefficiency and corruption. Unchecked they often do (as I think private sector does in a similar fashion) as is evident.

Even if some tyrannical mega-corporation merged with Tirez and dominated every aspect of the tire economy, from rubber extraction, to manufacturing, to distribution, and the entire automobile economy to boot, they still would face market pressure not to rip people off. This is because of substitution. People have other means to travel. There are other materials that tires could be made from than rubber. Consumers have the capacity to substitute a nearly infinite amount of products for products less available, and this makes it literally impossible for such corruption and fraud to run rampant in the private sector. It is only through state-sanctioned means that companies have any power to run amok in this way.

Let's assume this is the case. Still one clear issue would be time. For industries that require mass investments, research and infrastructure, what is preventing it from taking a lifetime (to slightly exaggerate) before competition can challenge them and the market can adjust? What I mean is that I'm not sure the market is quite as simple as that, and no external factors can hinder or downright block the market from working (yes yes, government regulations and incentives, but other than those). It is clear that individuals will use every trick in the book to try to circumvent that in order to maximize profits, which is the main goal for almost everyone. The scientific method may be a good comparison: the peer review mechanism will drag the consensus kicking and screaming to the right direction, but it may take years or decades for it to do so.

Well aside from competition, if people value the peace of mind that comes from such a service, it isn't as if watchdogs are incapable of emerging in a free market.

For sure, but herein again lies what I feel is a very significant contradiction, the main goal of these services isn't to ensure whatever they are meant to safeguard, but to make a profit. Yet again I'm not convinced, that while competition undoubtedly will have the unintended effect of pushing them to the direction of producing a more cost-efficient service, from a consumer's lifespan perspective they may get caught in a perpetual cycle of just services with improved marketing, branding and cutthroat tactics. A good marketing campaign is way cheaper than research. Of course this is a polarized view but so I think is a corrupt and inefficient government.

The simplest examples of these are websites like yelp and tripadvisor, but those examples are kind of superficial and not likely to satisfy the more left-minded people. A somewhat better example is the Better Business Bureau.

The effectiveness of the BBB in preventing unethical business practices notwithstanding, this is at the very least proof that business are willing to pay to be be policed, and by extension, their customers are willing to pay for the privilege of knowing whether a business meets a stated list of minimal standards.

For certain things, tripadvisor being a great example, I think a private sector solution is the only valid option, but when it comes to safety and health, I would personally leave it to the government.

And I can definitely see companies self-regulating, such as getting ISO-certified and what not, where ever they see a business case for it. But that's also my worry, there needs to be the business case, it's not an inherent want to provide the best possible service.

This model could very easily extend to a forthcoming private corporation that fills the role of currently state-run departments of health inspection. Provided that customers who eat at restaurants or buy from grocery stores value knowing whether said businesses are on the up and up, those businesses will pay a company to do random health inspections and keep an up to date health score. As such inspection services would exist in a private context of ever-present competition, they would be similarly forced to provide an effective service. Eventually, businesses would highly value the seal of approval that comes from a prestigiously pre-eminent inspection company, and would be foolish not to seek one. Needless to say, this would all come at a decreased cost to the bureaucratic state-based alternative that has much fewer incentives to increase the quality or reduce the cost of its work to the consumer.

Let's hope you're right, since this is the likely direction with continual government cutbacks.

Thanks for your responses (wuf also), while I'm not converted I got some fresh perspectives to consider.

[Renton]

the main goal of these services isn't to ensure whatever they are meant to safeguard, but to make a profit.

I can see that plainly you are attempting to gracefully bow out of the debate so I'll try not to open pandora's box again, but you need to objectively evaluate your anti-profit bias. It's an irrational way to argue against capitalism. I liken it to evolution vs creation debates when the creationist says "because Jesus Christ said...." There are plenty of rational arguments against capitalism, that it doesn't internalize costs, that it has trouble providing social services that are susceptible to free riders, that it doesn't allow large infrastructure projects to be built when necessary. There are strong pro-capitalist answers to argue against each of those, but they are still decent pro-state arguments. The fear that corporations will run amok in pursuit of short term profits at any cost to society is not a sound argument though.

[a500lbgorilla]

I think you may be missing my point. The value isn't an unknown constant that someone or some committee can ascertain with adequate knowledge. It is a variable in constant flux that can only be known for a given individual based on that individual's preferences, needs, and/or priorities.

So any time a person purchases something, that's that something's value.

And if everyone were allowed to freely purchase everything, everything would be held at its value.

And so a purely free market would allocate all resources best, because all actors would be bidding on all resources based on their evaluations.

This smacks of circular thinking to me. Value isn't a thing at all, it's just the what you spackle into the cracks.

I know for a fact I overpaid today for shitty fig newton cookies. Because I remembered them being a thing and I remembered me liking them and dammit they weren't worth the 4.50.

Will that swear me off fig newtons in the future? Sure, for a spell, until I forget and in the mean time - the dream that was vanilla waffers.

Basically, if ever anyone 'misevaluated' anything, their evaluation would still be the proper one because they made it, because it's not possible to 'misevaluate' a product you choose to buy.

[wufwugy]

Government is a company, just like any other, although it happens to be (in theory) owned by everyone, and it has the capability to rewrite the rules of the game. The rules that govern this company, its managers and employees, do not differ, in principle, from those that govern private limited companies, unless the rules are changed to either favor or handicap one or the other. Agree? So just like for the employees of the private company, there needs to be controls in place to make sure the worker does his job properly, regardless of his/her self-interests, and whether they're working for a public or private organization. Working for a company does not equate just dealing with your own cash and personal direct responsibility, the checks needs to be in place in both cases. Actually I'd even go as far to say, having worked both for the private and public sector, that in a public sector job I'm MORE inclined to do what's good for the general population, since it IS my tax money I'm dealing with, whereas in a private company I am less concerned about the future of the company, since if it does go under, another one will replace it and most people won't even notice. Operating a one man shop or acting as a major shareholder in a corporation are special cases.

Maybe government is a company, but it doesn't behave in a system of companies. This is the problem. Even then, government isn't a company because of its mandatory revenue streams. Companies live and die based on getting people to freely choose their services. Bureaucracies don't ever die because taxes are mandatory

This is one of the main reasons I use the evolution analogy. Macroeconomics happens in populations, just like evolution. Extrapolating individual behavior to the whole leaves a lot to be desired. This is why looking at individuals in private companies vs in public companies doesn't tell us much about the difference between markets and government. What sets markets aside is competition. The same is true in evolution. Mutations and environment creates survival of the fittest in biology, and consumers and competition creates survival of the fittest in economies.

It can be said that it doesn't matter what's going on in a single company or bureaucracy. What matters is if there are any competitors. Government does not have competitors. This is a fundamental, inherent reason why government intervention into markets is bad, regardless of intentions or the intelligence of those involved. Why am I allowed to choose what companies to buy food from but I'm not allowed to choose my government? Is it because I need government? Okay, for what do I need government? I think there are several answers to this question, but I think answering the question shows how much we don't need government too

I think there has been far more government intervention and regulation in place for the past 150 years than for the previous 199,850. On the contrary, I feel most of that time people lived in something much more akin to a free market. We've never been as prosperous as we are today, and we have exponentially more and more complex regulations in place every year. Undoubtedly capitalism and freeish global trade have had a key role in the recent (relatively) prosperity boom, but I'd argue scientific advancement being at least, if not way more important. I would also argue that private sector investment into basic scientific research (rather than productization of discoveries) is a very recent phenomena, and had far less to do with the advancements in the past 150 years compared to publicly funded research.

Legal allowance and cultural appreciation of private ownership and innovation are very new. It started changing in very small ways in the Netherlands region in the 18th Century (IIRC). American intellectuals incorporated the improved-upon ideas by British intellectuals (but OMG Adam Smith was Scottish) in the late 18th Century. The 20th Century saw the most epic of epic showdown between capitalism and socialism, capitalism won. The contrast is so stark that West Germany is amazing while East Germany sucks. This isn't a difference of government, but economics. In China, it has only been at the hands of market reforms that it has done what its done


I think the evolution analogy is very important. Both evolution's and capitalism's driving mechanisms are variation and competition within populations

[CoccoBill]

Forgot to address this.

While collectivism held sway, the global GDP was a stagnant horizontal line for the first 199,850 years since homo sapiens emerged, and then a sharp nearly vertical spike for the last 150 thanks to a sudden injection of individual rights and free enterprise. This unbelievable progress is met with nothing but skepticism and scorn by most scholars. Scholars with the brass-plated balls to state that we consume too much, that our standard of living is too high, that money shouldn't determine everything, and that free trade exploits poor people and children. Scholars who would do well to reacquaint themselves with the default state of humanity: abject poverty, hunger, and a miserable struggle to acquire the absolute basics of life support.

I think there has been far more government intervention and regulation in place for the past 150 years than for the previous 199,850. On the contrary, I feel most of that time people lived in something much more akin to a free market. We've never been as prosperous as we are today, and we have exponentially more and more complex regulations in place every year. Undoubtedly capitalism and freeish global trade have had a key role in the recent (relatively) prosperity boom, but I'd argue scientific advancement being at least, if not way more important. I would also argue that private sector investment into basic scientific research (rather than productization of discoveries) is a very recent phenomena, and had far less to do with the advancements in the past 150 years compared to publicly funded research.

[Renton]

Forgot to address this.



I think there has been far more government intervention and regulation in place for the past 150 years than for the previous 199,850. On the contrary, I feel most of that time people lived in something much more akin to a free market. We've never been as prosperous as we are today, and we have exponentially more and more complex regulations in place every year. Undoubtedly capitalism and freeish global trade have had a key role in the recent (relatively) prosperity boom, but I'd argue scientific advancement being at least, if not way more important. I would also argue that private sector investment into basic scientific research (rather than productization of discoveries) is a very recent phenomena, and had far less to do with the advancements in the past 150 years compared to publicly funded research.

As human beings languished in the millenia before the 1800s, it was mostly authoritarian. It's worth pointing out that some of the most advanced civilizations of ancient times were the earliest attempts at a mostly free society. The great ancient empires were at least pseudo-democratic. The end of birth-based nobility on a large scale to my knowledge did not occur until the 1800s, though. Now whether you can say that the great advances of the industrial revolution happened because of increased individual liberty or in spite of it is a reasonable question. Global GDP per capita was stable with a pseudo-capitalistic society in Great Britain for quite a while before the first industrial revolution. Either way, you're wrong about private vs public research.

The vast majority of gilded age era advancement was due to private money. The first industrial revolution was mainly due to the steam engine, a private invention. James Watt's research was funded by private means and he become a very rich man from it. Huge piles of wealth were created in the late 1800s - early 1900s by the great captains of industry who brought us modern steel, railroads, cars, communication, human flight, all by private means and with private money. Governments didn't do a lot to intervene one way or the other in technological advancement until the modern era. They did, however, actively and brazenly, try to prevent advancement in many cases (horses vs cars being one example among innumerable). I guess you can give them a little credit with the space programs, which were mostly spectacularly expensive failures of public enterprise if I'm honest.